ISTANBUL: Turkey's central bank cut interest rates for the sixth straight month on Tuesday, lowering its overnight lending rate by 25 basis points despite high inflation and the threat of possible credit rating downgrades.
As expected, the bank cut the highest of the multiple interest rates it uses to set policy to 8.5 percent. It left its benchmark one-week repo rate unchanged at 7.5 percent.
Fifteen of 17 economists in a Reuters survey had forecast a 25 basis point cut in the overnight rate, while two expected a cut of 50 points.
President Tayyip Erdogan, who wants stronger consumption-led growth, has made repeated calls for cheaper credit.
He told commercial lenders this month following a failed coup that they should not be charging high interest rates, and promised action against those that "go the wrong way".
The attempted putsch on July 15 and its aftermath have increased uncertainty for investors and sent Turkey's lira to record lows against the dollar, although the currency has since recovered somewhat.
"The adverse impact of domestic developments in mid-July on market indicators has been largely reversed due to improved global risk appetite and the recent measures," the central bank said in a statement.
Credit agency Fitch lowered its outlook on Turkey to negative from stable on Friday, while Moody's said on July 18 it was putting its rating on review for a possible downgrade to junk status.
"The prospects for significant structural reform that would shift the structure of growth from private consumption have diminished," Fitch said in its statement on Friday.
"The central bank and commercial banks are facing renewed political pressure on interest rates."
Consumer prices rose 8.79 percent year-on-year in July, up from 7.64 percent in June, meaning inflation is running well above the central bank's year-end estimate of 7.5 percent.
Comments
Comments are closed.