Close

CBRT cuts upper band for 7th consecutive month

DAILY SABAH
ISTANBUL
Published
CBRT cuts upper band for 7th consecutive month

The Central Bank of the Republic of Turkey's (CBRT) Monetary Policy Committee (MPC) has launched a 25-basis point cut in the upper band of interest rates following recent reductions in the last six months, in line with expectations. The committee reduced the marginal funding rate to 8.25 percent from 8.5 percent, while keeping the borrowing interest rate stable at 7.25 percent.

Analysts did not expect the committee to change one-week repo rates, thinking it would reduce marginal funding rate by 25 basis points.

Additionally, all but one of the 15 economists who attended the Anadolu Agency (AA) Finance Poll expected the upper band rate to be lowered to 8.25 from 8.50, while one economist expects a cut by 50 base points.

Therefore, no change was expected in other short-term rates, according to the poll results announced Tuesday.

The MPC kept one-week repo rates and overnight interest rates stable at 7.5 percent and zero percent respectively; however, it reduced lending interest rates to 9.75 percent from 10 percent.

The MPC stated that the slowdown in total demand supports the gradual fall in core inflation, while inflation is expected to decrease in the short term because of the downward trend in food prices. In addition, tax adjustments in fuel products as well as developments in other cost elements have restricted improvements in the inflation rate, requiring that a cautious stance be maintained on the monetary policy.

Based on these evaluations, the MPC decided to take a sober and cautious step toward simplification by taking its contributions to the efficiency of the monetary policy into consideration.

The decisions regarding the monetary policy will depend on the inflation outlook in the upcoming period.

The cautious attitude regarding the monetary policy will be maintained by considering the expected inflation rate, price behaviors and developments in other elements affecting inflation. It must be highlighted that all new data and news to be announced might cause the committee to change its future monetary policy stance.

Meanwhile, the consumer price index (CPI) decreased by 0.29 percent in August, with the annual inflation rate falling to 8.05 percent from 8.79 percent in earlier this month, according to data released earlier this month by the Turkish Statistical Institute (TurkStat).

The CPI fell for the first time since April, raising hopes for achieving the updated 7.5 percent expectation by the government and the CBRT. Monthly inflation also fell to its lowest rate in 14 months.

Share on Facebook Share on Twitter
DAILY SABAH RECOMMENDS