The Central Bank of the Republic of Turkey (CBRT) announced on Thursday that it lowered its policy rate (one-week repo) by 200 basis points to 16% from 18%. The market expectation was a rate reduction of 100 basis points to 17%. The Turkish lira fell sharply in the market after the news, with USD / TRY jumping to 9.4835, the new record high.
The central bank stated that the effects of inflation are due to transitory factors. They see that the tightening policy began to have a higher contractionary effect than expected in commercial loans. Although he also explained that the main indicators show that “domestic economic activity remains strong, with the help of robust external demand.”
The CBRT said it will decisively use all available instruments until strong indicators signal a permanent drop in inflation. “Stability in the general price level will promote macroeconomic stability,” the central bank said.
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