By www.CentralBankNews.info Turkey’s central bank cut its benchmark, short-term interest rates by 50 basis points, as expected, but also raised its reserve requirements for foreign currency deposits by the same amount in a move designed to stimulate the economy yet deter capital inflows than could threaten financial stability.
The Central Bank of the Republic of Turkey (CBRT) cut its benchmark, one-week repo rate to 4.5 percent from 5.0 percent and shifted its interest corridor further down by cutting the overnight borrowing rate, the ceiling in the corridor, to 3.5 percent and the lending rate, the corridor’s floor, to 6.5 percent from 7 percent.
“Capital inflows remain strong and credit growth hovers above the reference rate,” the central bank’s monetary policy committee said in a statement, adding:
“The Committee indicated that, in order to balance the risks on financial stability, the proper policy would be to keep interest rates low while increasing foreign currency reserves via macroprudential measures.”
Other short-term rates that were cut by the CBRT include the rate on borrowing by primary dealers via repo transactions, which was reduced to 6.0 percent from 6.5 percent and the lending rate on the late liquidity window was cut to 9.5 percent from 10 percent while the borrowing rate remained at zero.
