Central Bank to meet to review key rates

ISTANBUL

The Monetary Policy Committee (MPC) of Turkey’s Central Bank is set to meet today to review its key interest rates, with most analysts expecting the bank to deliver a rate cut between 200 to 300 basis points.

At its latest rate-setting meeting on June 12, the Central Bank kept the policy rate (one-week repo auction rate) constant at 24 percent.

Murat Uysal is overseeing the MPC meeting for the first time since he took the helm of the Central Bank earlier in July.

Former Governor Murat Çetinkaya was dismissed from his post early on July 6 via a presidential decree, to be replaced by deputy governor Uysal.

Commenting on the removal of Çetinkaya, President Recep Tayyip Erdogan said on July 9 that the former governor’s decisions had burdensome costs, which were “beyond endurance,” and thus a change was needed.

Çetinkaya failed to consign trust to the markets, Erdoğan stressed. “His interactions with the markets were not great. These paved the way for other problems [in the markets].”

In his first remarks, Uysal underlined that the design of monetary policy processes in the new period will be based on a data-focused approach.

“The MPC will analyze all data releases and make the most appropriate decision guided by commonsense and consultation,” he said.

Uysal noted that the Central Bank will be sharing more concrete information on a more frequent basis through various media regarding the bank’s approach to monetary policy and general issues.

First rate cut in four years

Economists think that the Central Bank is set to opt for a rate cut which would mark the first reduction since February 2015.

Economists’ rate cut expectations vary between 200 and 250 basis points.

In 2018, the Central Bank held nine MPC meetings, as interest rates climbed from 8 percent to 24 percent over the course of the year.

Speaking to Anadolu Agency, economists predicted that the policy rate will decline to 18 percent at the end of this year.

The decline in inflation expectations and the drop in Turkey’s CDS (credit default swaps) fuelled expectations for a rate cut.

The latest survey by the Central Bank showed that end-year inflation expectations eased to 15.01 percent in July from 15.85 percent in the previous month while the country’s CDS declined from 521 in late May to 367 as of July 23.