Turkey Central Bank Cuts Rates By 50 Bps

(RTTNews) - Turkey's central bank trimmed its benchmark interest rate for the third straight month on rising pressure from the government for looser monetary policy.

The Monetary Policy Committee, led by Governor Erdem Basci, lowered the one-week repo rate to 8.25 percent from 8.75 percent. The outcome of the meeting matched economists' expectations.

The bank has reduced the rate by 50 basis points in May and by another 75 basis points in June after raising it by a massive 550 basis point hike in January.

The overnight lending rate was kept at 12 percent, while the borrowing rate was reduced to 7.50 percent from 8 percent.

William Jackson, an emerging markets economist at Capital Economics said pressure from the government means that further rate cuts look likely over the coming months.

However, given the backdrop of high inflation and a large external financing requirement, he said the MPC will need to tighten monetary conditions before too long.

Inflation expectations, pricing behavior and other factors that affect inflation will be closely monitored and the tight monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook, the bank said in a statement.

In June, inflation slowed slightly to 9.16 percent from 9.66 percent in May. The bank today said the adverse impact of exchange rate since mid-2013 on inflation is gradually tapering off.