ANKARA: Turkish inflation and real interest rates are likely to keep falling, central bank Governor Erdem Başçı was quoted on Friday as saying, days after delivering a rate cut seen as the start of a moderate easing cycle.
The central bank lowered its main interest rate on Tuesday but drew a swift rebuke from government ministers who said the 50 basis point cut, five months ahead of a general election, was not enough to support economic growth.
“Strong and balanced growth rests on a three-pronged strategy – namely low inflation, low real interest rates and prudent borrowing,” Başçı told the state-run Anadolu new agency (AA) on the sidelines of the World Economic Forum in Davos. “As for the first two, it is highly likely that inflation and real interest rates will continue to fall.”
Başçı said he will share “the details about the likely trend of the interest rates” on Jan. 27, when the bank announces its quarterly inflation report at a press conference in Ankara.
Separately, the central bank announced it would start charging commission on euro-denominated deposits, in response to expectations that the European Central Bank would maintain its negative interest rate policy for the foreseeable future.
The bank said it would charge 0.2 percent commission per year for euro-denominated deposits held with it. Most foreign exchange in Turkey is held in dollars. Analysts said the move would deter banks from keeping deposits in euros.
