The Turkish lira weakened today after the central bank reduced interest rates, spurring speculation that policy makers will subdue currency’s gains to support the economy.
The Central Bank of the Republic of Turkey lowered its interest rates today, cutting both the borrowing rate and the lending rate by 25 basis points to 4.5 percent and 8.5 percent respectively. The tone of the central bank’s statement was rather positive:
Domestic demand follows a moderate pace while exports continue to increase despite weak global activity. Overall, current account deficit continues to decline gradually.
Yet the bank was worried that “inflation will continue to fall despite the recent increase in oil prices”. All in all, the Turkish central bank concluded that it will be prudent for maintaining financial stability to lower borrowing costs.
As it is usually happens, the currency fell after an interest rate cut. Furthermore, market analysts think that Monetary Policy Committee will monitor the lira and will curb its appreciation.
USD/TRY rose from 1.7672 to 1.7763 as of 20:52 GMT today. EUR/TRY advanced from 2.3598 to 2.3791.
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