The Turkish central bank cut its key rate by 100 basis points to 36% on Thursday, matching market expectations. It had held rates at 37% since the Iran war began, and it also acted to support liquidity after turmoil in the fund market.
Turkey's central bank reduced its key interest rate by 100 basis points to 36% on Thursday, after keeping rates unchanged at the previous five meetings. The move matched market expectations.
Economists expected the cut
The decision came as the bank assessed inflation effects from the Iran war. In a poll, 22 economists predicted a rate cut while only two expected no change to borrowing costs.
Looking ahead, economists anticipate another 100 basis point reduction at the December meeting, which would bring the year-end policy rate to 35%.
Liquidity measures since the war began
The bank had kept its policy rate at 37% since the Iran war began at the end of February. During that period, it implemented liquidity measures that pushed the lira overnight rate up to the 40% limit until August.
Fund market turmoil
Separately, Turkey's investment fund sector faced a crisis last month after regulators ordered the liquidation of 131 funds. Those funds had accumulated more than $20 billion in assets over three years.
Authorities started implementing measures on September 17 following the turmoil. The central bank increased repo funding and raised banks' borrowing limits tenfold to support liquidity.
Central Bank Governor Fatih Karahan said earlier this month that data showed no risk of contagion from the crisis. He added that the bank would intervene again if necessary.
The lira stood at 49.6275 after the rate decision, compared with a close of 49.6025 on Wednesday.
Source: Investing.com
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