Turkey’s central bank cut its policy rate by 200 basis points to 12 percent on Thursday, a bit more than expected according to Reuters, and suggested its aggressive easing cycle was nearing an end as inflation levels off and the economy emerges from recession.
The bank lowered its benchmark one-week repo rate from 14 percent, bringing Turkish “real” rates below the levels in most emerging markets. Economists polled by Reuters had expected a cut of 150 basis points.
“At this point, the current monetary policy stance is considered to be consistent with the projected disinflation path,” the bank said after its policy meeting.
Turkish inflation has dropped from a peak above 25 percent in last year’s painful currency crisis. But after touching single digits in recent months, it edged up to 10.6 percent in November.
Turkish Central Bank Governor Murat Uysal said policy is tailored to leave a “reasonable real rate on the underlying” inflation trend.
The fourth consecutive easing comes a day after Washington moved a step closer to imposing sanctions on Turkey over its military incursion in Syria and its purchase of a Russian missile defense system.
If applied, sanctions could spark another bout of lira weakness, curb the recovery and force the central bank to contemplate rate hikes despite pressure from the government.
President Recep Tayyip Erdoğan has repeatedly called for lower rates and on Monday said the policy rate, as well as inflation, will hit single digits in 2020.
Erdoğan ousted the former central bank chief for not following instructions in July, when Uysal took the reins and began an easing cycle that has far eclipsed expectations earlier in the year.
