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    Turkish CB sees 'moderate' future rate cuts, despite declining inflation

    Reuters
    29.04.2009 - 16:02 | Son Güncelleme:

    ISTANBUL - Turkey's central bank expects any future interest rate reductions to be moderate, even as the decline in inflation is expected to accelerate, according to a statement released on Wednesday.

    The bank may need to maintain long-term 'downward flexibility' in its monetary policy, it said in the minutes from its last monetary policy meeting held on April 16, where it cut benchmark interest rates by 75 basis points.

     

    'Future rate cuts may be measured,' the central bank said in the statement after cutting the borrowing rate to 9.75 percent and the lending rate to 12.25 percent.

     

    'Downward flexibility will be maintained in monetary policy, depending on conditions.'

     

    But the public sector's growing financing needs due to the global economic crisis may weaken the positive impact of fiscal measures, the bank also said.

     

    Lower oil and commodity prices are expected to pull inflation below this year's target of 7.5 percent, giving more room to the central bank to respond to slowing economic activity and rising unemployment.

     

    Turkey's economy contracted 6.2 percent in the fourth quarter of last year. Unemployment rose to a record 15.5 percent in January.

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