Turkish central bank steps up pace of rate cuts

Turkey’s central bank cut overnight lending rates in reaction to falling inflation, which made it less necessary to maintain a wider interest rate corridor.

It followed a similar decision by the previous central bank governor, Erdem Basci, in February.

The marginal funding rate was cut from 10.5% to 10.0%, while keeping the borrowing rate at 7.25%.

A cut had been widely-expected but analysts forecasts were spread across a wide range, with some anticipating another 25 basis point reduction and others a 100 basis point move.

The one-week repurchase rate was steady at 7.5%.

Annual loan growth was continuing at “reasonable rates” in reaction to the tight monetary policy stance while demand from European Union countries was continuing to support exports “at an increasing pace”, although there were “elevated” geopolitical risks in other export markets, the central bank in Ankara said in a statement.

Nonetheless, future monetary policy decisions would be contingent on the inflation outlook, the central bank added.

Inflation had declined in marked fashion recently but improvement in ‘core’ inflation remained limited, the central bank’s monetary policy committee added.

As of 12:22 BST the US dollar was weaker by 0.73% against the Turkish lira at 2.8102.

At the beginning of May 2012 the dollar was to be found at 1.52 versus the lira.