Turkish central bank slashes rates 250 pts as sanctions threat fades

Credit: REUTERS/UMIT BEKTAS

Turkey's central bank slashed its policy rate by a more than expected 250 basis points to 14% on Thursday, extending an easing cycle on the back of lower inflation and a steadier lira after Washington cancelled sanctions over a military incursion into Syria.

ISTANBUL, Oct 24 (Reuters) - Turkey's central bank slashed its policy rate by a more than expected 250 basis points to 14% on Thursday, extending an easing cycle on the back of lower inflation and a steadier lira after Washington cancelled sanctions over a military incursion into Syria.

The bank lowered its benchmark one-week repo rate TRINT=ECI from 16.5%. It has cut rates aggressively from 24% since July to help revive Turkey's recession-hit economy after last year's currency crisis.

Economists had expected the bank to lower rates by only 100 basis points, according to a Reuters poll, after inflation slowed and after a U.S. deal over Turkey's incursion steadied the lira.

Expectations for monetary easing were initially curtailed after the incursion began on Oct. 9, hitting the currency and prompting U.S. sanctions over Turkey's attacks on Kurdish-led forces that were once U.S. allies.

But the lira, which plunged 30% last year, regained some losses after Washington opted last week for a light set of sanctions, re-opening the door to the rate cut. It rallied again on Wednesday when U.S. President Donald Trump cancelled them.

Last year's currency crisis tipped the Middle East's largest economy into recession, sent inflation soaring above 25%, and prompted Turkey's central bank to hike rates.

Inflation has since eased, reaching 9.26% in September. The central bank expects it to accelerate to 13.9% by year-end once the so-called base effects have worn off.

(Reporting by Ezgi Erkoyun and Daren Butler; Editing by Jonathan Spicer and Gareth Jones)

((daren.butler@tr.com; +90-212-350 7053; Reuters Messaging: daren.butler.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More