Turkey’s central bank cut its one-week repo rate by 100 basis points, from 37.0 percent to 36.0 percent, at its latest rate decision. The overnight lending and borrowing rates were also lowered by 100 basis points, to 39.0 percent and 34.5 percent respectively.
Shift in language
Tatha Ghose of Commerzbank noted a change in the central bank’s wording. Where inflation indicators had previously been said to suggest a slowdown in the underlying trend, the bank now says they confirm it, a shift Ghose read as significant.
Ghose described the cut itself as expected. The central bank, he said, will decide the size and timing of future steps prudently and on a meeting-by-meeting basis. It is now committed to a rate-cutting path, he added, even if it may sometimes skip a meeting.
Risks still flagged
The central bank still points to elevated energy prices as an upside risk to inflation. Oil has climbed back above $110 a barrel, Ghose noted. He also cautioned that September’s softer inflation reading could prove a one-off, caused by a temporary decline in imported energy prices in prior months.
The central bank separately described real economy activity as indicating weakness. Commerzbank expects USD-TRY to trade at 52.0 by year-end.
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