Turkey rate cut sends mixed message: Fitch

LONDON

Fitch Ratings has said the Turkish Central Bank’s 0.5 point rate cut on May 22, highlights policy swing risks by sending mixed messages.

“The Central Bank of the Republic of Turkey’s [CBRT] decision to cut its main interest rate while leaving other rates unchanged sends a mixed message regarding its monetary policy that may dent its credibility and highlights the risk that policy reversals could undermine economic adjustment,” Fitch said in a statement released on May 23.

The bank announced that the Monetary Policy Board (PPK) had decided to cut benchmark one-week repo rates to 9.5 percent from 10 percent on May 23, while keeping its overnight lending rate at 12 percent and overnight borrowing rate at 8 percent.

“Cutting the main policy rate as inflation continues to head upwards toward the double digits reinforces our judgment that policy coherence and predictability remain weaker in Turkey than in some of its rating peers, a point that we highlighted when we affirmed Turkey’s ‘BBB-’ sovereign rating last month,” the agency said commenting on the move.