Turkey’s central bank is expected to lower its policy rate by 50 basis points to 10.75% this week, a Reuters poll showed on Monday, which would be its sixth consecutive cut in an aggressive easing cycle aimed at boosting economic growth.
The central bank has slashed its policy rate by 1,275 basis points to 11.25% since July to help Turkey out of a recession that saw the economy contract annually in the three quarters to mid-2019.
The decision to cut again may be more difficult to take after the Turkish lira slipped 1.6% against the dollar this year, and inflation has edged higher in the last three months after dipping briefly to single digits in autumn.
Year-over-year inflation stood at 12.15% in January, above the central bank’s policy rate, meaning lira depositors faced negative real rates.
The bank targets inflation around 5%.
The median estimate in a Reuters poll of 15 institutions for the one-week repo rate after the central bank’s meeting on Wednesday stood at 10.75%, reflecting a 50-basis point cut.
A rate hike was not among the forecasts, which ranged from no change to a 75-point cut in benchmark rate.
The easing cycle is set to continue given the central bank has predicted single-digit inflation in 2020 and the government has emphasized economic growth, said Enver Erkan, economist at Tera Yatirim.
“Growth will be supported by loan and consumption channels but the risks on price stability are increasing,” he said in a note.
“The central bank paying attention to the risks on inflation, limiting its steps according to the outlook could be evaluated as a more appropriate policy path,” Erkan wrote.
The median estimate for the policy rate at year-end stood at 10%, with estimates ranging between 12.50% and 9.0%. Twelve economists participated in the year-end poll.
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