Central Bank slashes policy rate by 50 basis points

ANKARA

The Central Bank on Feb. 23 slashed its policy rate by 50 basis points to 8.5 percent from 9 percent as the country continues to reel from the aftermath of a devastating quake which affected millions of lives.

Consecutive quakes rocked Türkiye earlier this month, and were the region’s strongest in nearly a century with a death toll of more than 40,000 lives thus far.

“Before the worst natural disaster of the last century, leading indicators have been pointing to a stronger domestic demand compared to foreign demand as well as an increase in the growth trend in the first quarter of 2023,” the Central Bank’s Monetary Policy Committee (MPC) said in a statement after its February meeting.

“The impact of the earthquake on production, consumption, employment and expectations is being extensively evaluated. While the earthquake is expected to affect economic activity in the near term, it is anticipated that it will not have a permanent impact on performance of the Turkish economy in the medium term,” it said.

“While level and underlying trend of inflation have been improved with the support of the implemented integrated policy approach, the effect of earthquake driven supply-demand imbalances on inflation is closely monitored. It has become even more important to keep financial conditions supportive to preserve the growth momentum in industrial production and the positive trend in employment after the earthquake,” the statement read.

“Accordingly, the Committee decided to reduce the policy rate by 50 basis.”

The country’s most recent inflation rate in January stood at 57.68 percent.

The Central Bank “will continue to use all available instruments decisively until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is achieved in pursuit of the primary objective of price stability,” it said.