MNI CBRT WATCH: Turkey CenBank Cuts 1W Repo 250Bps As Expected
MNI (LONDON) - The Central Bank of the Republic of Turkey lowered key interest rates by 250 basis points for a second successive meeting on Thursday, with the 1W repo rate cut from 47.5% to 45%, and an expected January rise in inflation seen as temporary. (See MNI EM CBRTWATCH: CBRT To Look At Second 250bp Cut In Two Months)
Disinflationary domestic demand levels, “relatively low” core goods inflation and improvements in both household inflation expectations and pricing behaviour all contributed to the decision- although the latter remain upside risks to the outlook, the CBRT said in a statement.
“While the underlying trend of inflation decreased in December, leading indicators point to an increase in January, in line with the projections. This increase is mainly driven by services items with time-dependent pricing and backward indexation."
January's communication departed from some of the language used last month, with a tight monetary policy stance now seen being maintained “until price stability is achieved via a sustained decline in inflation,” rather than “until a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations converge to the projected forecast range.”
The degree to which the policy rate remains tight will be determined by taking into account “realised and expected inflation, and the underlying trend,” rather than “both realised and expected inflation.”