Survey sees key rate cut in Turkey

Bloomberg

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The overnight borrowing rate will be lowered by a percentage point to 10.5 percent, according to the median estimate of 17 economists surveyed by Bloomberg.

Forecasts ranged from a half point to a point-and-a-half reduction. The Ankara-based Bank will announce its decision at 7 p.m. tomorrow.

Governor Durmuş Yılmaz has cut a total 5.25 percentage points from the rate in the last four months, joining monetary authorities worldwide in reducing the cost of borrowing as the global crisis sends industrial output and inflation tumbling.

"This will be an important decision that may give us some signal about when the Central Bank will decide to pause the easing," said Şengül Dağdeviren, chief economist at ING Bank in Istanbul.
"For the moment, however, it’s very clear that Durmuş Yılmaz wants to carry on cutting on the basis of sharp falls in growth and in inflation," said Dağdeviren.

Inflation slowed down in February to 7.7 percent, the lowest rate in a year-and-a-half. The Central Bank’s goal for the end of the year is 7.5 percent and Yılmaz said on Jan. 26 that overshooting the goal would be "at the cost of falling output and rising unemployment."

The economy grew 0.5 percent in the third quarter of 2008, the slowest pace in more than six years.

The International Monetary Fund, or IMF, forecasts a 1.5 percent contraction in 2009. Turkey is seeking IMF support to help finance its current account deficit.

Turkey and the IMFpaused negotiations on Jan. 26 in a dispute over budget planning and the fund said on March 12 that it had submitted a revised set of proposals to Turkey.