(RTTNews) - Turkey's central bank on Thursday decided to cut its benchmark interest rate to a new record low to curb capital inflows amid muted inflationary pressures.The Central Bank of the Republic of Turkey slashed its policy rate by half a percentage point to 6.5%, exceeding expectations for a quarter percentage point cut.
Further, the borrowing rate was lowered to 1.5% from 1.75%, while the lending rate was increased to 9% from 8.75%.
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Turkey Interest Rate Slashed To New Record Low
(RTTNews) - Turkey's central bank on Thursday decided to cut its benchmark interest rate to a new record low to curb capital inflows amid muted inflationary pressures.
The Central Bank of the Republic of Turkey slashed its policy rate by half a percentage point to 6.5%, exceeding expectations for a quarter percentage point cut.
Further, the borrowing rate was lowered to 1.5% from 1.75%, while the lending rate was increased to 9% from 8.75%.
The central bank said increasing capital inflows was driving up Turkey's current account deficit, putting the country's financial stability at risk.
"Recent developments and related policy decisions in European and US economies have been exacerbating these risks, necessitating a revision in the domestic policy mix," the bank said.
It stated that a lower policy rate, a wider interest corridor, combined with higher required reserve ratios at lenders would be "more effective" as a policy mix in current conditions.
"The committee assesses that the net impact of these measures on the monetary conditions will not be expansionary," the bank said.
"The effects of today's decisions will be monitored closely and additional measures will be implemented if necessary."
The central bank added that inflation is likely to continue falling assisted by lower unprocessed food prices.
Turkish consumer prices rose 7.3% year-on-year in November, down from an 8.6% increase in the previous month.
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