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Financial News: Turkish Central Bank Unveils Massive 425 Bps Rate

Turkish Central Bank Unveils Massive 425 Bps Rate Cut

07/25/2019 - 07:30:00 (RTTNews)

(RTTNews) - Turkey's central bank slashed its key interest rate on Thursday, citing an improving inflation outlook, and the reduction was more than what economists had expected. The Monetary Policy Committee, led by the new TCMB Governor Murat Uysal, decided to reduce the benchmark policy rate, which is the one-week repo auction rate, to 19.75 percent from 24 percent.

Economists had forecast a cut to 21.5 percent.

The previous change in the rate was a massive hike in September last year.

The central bank expects inflation to remain slightly below the April Inflation Report projections by the end of the year. "The Committee assesses that maintaining a sustained disinflation process is the key for achieving lower sovereign risk, lower long-term interest rates, and stronger economic recovery," the TCMB said in a statement. "Keeping the disinflation process in track with the targeted path requires the continuation of a cautious monetary stance."

The extent of the monetary tightness will be determined by considering the indicators of the underlying inflation trend to ensure the continuation of the disinflation process, the bank added. Early this month, the Turkish President Recep Tayyip Erdogan removed Murat Cetinkaya from the post of the TCMB Governor following his refusal to cut interest rates to help stimulate economic growth.

Erdogan had repeatedly criticized Cetinkaya for high interest rates and sought lower interest rates to stem inflation.

Cetinkaya's dismissal sparked worries about the central bank's independence, which is vital for a stable economy, and pummeled the lira.

He was replaced by Deputy Governor Uysal, a known dovish member among the bank's interest rate-setters.

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