Turkey bank may cut rates to 12 percent in final front-loaded move

Turkey’s central bank may reduce interest rates by 200 basis points, or 2 percentage points, to 12 percent at a meeting on Thursday, Dünya newspaper reported.

The rate cut would signify the last front-loaded move by the central bank after it reduced its benchmark interest rate by 1,000 basis points to 14 percent since July, Dünya said.

While analysts are focused on the likelihood of a 150-basis point reduction, they say it would not be a surprise if the central bank cut rates by the extra 50 basis points, Dünya’s Şebnem Turhan said.

Turkey’s central bank has slashed interest rates to support the government’s efforts to reverse an economic slump after President Recep Tayyip Erdoğan sacked and replaced its governor in July and inflation slowed sharply.

A Reuters poll of economists published last week predicted an interest rate cut of 150 basis points. Meanwhile, U.S. investment bank JPMorgan said on Tuesday that it saw the central bank lowering rates by 100 basis points to 13 percent, but there was the risk that the bank would “over-deliver”.

Some analysts point to a decision by the central bank last week to increase the number of interest rate-setting meetings of its Monetary Policy Committee to 12 annually from eight as a sign that this week’s rate cut will be smaller than expected. The bank is now able to reduce borrowing costs at a more frequent, but slower pace, they say.