ISTANBUL: Turkey’s central bank cut a key interest rate Wednesday, with incoming Governor Murat Cetinkaya kicking off his tenure by accelerating a policy-easing cycle in the face of slowing inflation and a stabilizing domestic currency.
Led by Mr. Cetinkaya for the first time, the Monetary Policy Committee in Ankara cut the overnight lending rate for the second consecutive month to 10% from 10.5%, while holding steady the benchmark one-week repo rate at 7.5% and the 7.25% overnight borrowing rate.
Turkish assets rallied after Mr. Cetinkaya’s decision matched expectations, suggesting that the new monetary policy chief wouldn’t rush into rate cuts despite government pressure to do so. However, Wednesday’s move signaled that the governor may stick with his predecessor’s bias for a loose stance to help bolster economic growth even though inflation remains a concern.
“Some of the market players were concerned about the risk that the central bank would deliver or signal ‘radical’ rate cuts that would make Turkish assets vulnerable,” J.P. Morgan Chase & Co. economist Yarkin Cebeci said Wednesday. “Today’s decision will support the central bank of Turkey’s credibility and provide room for further cuts.”
All 15 economists in a Wall Street Journal survey had forecast no change to the benchmark and the overnight borrowing rates, while predicting the overnight lending rate would drop to 10%—with only three expecting a decline to 10.25%. Most said Wednesday that the central bank would cut the overnight lending rate to 9.5% in May.
