Central Bank of Turkey cuts key interest rate by 50 bps to 10.75 pct

The Central Bank of Turkey cut its benchmark interest rate again today by 50 basis points to 10.75 percent. It argued that lower interest rates are in line with projected disinflation. However, inflation accelerated again to 12 percent plus in January and PPi inflation accelerated more sharply.

Turkey’s real interest rate is negative now. The Turkish lira is expected to weaken sharply during the next EM risk off move, noted Commerzbank in a research report.

The central bank’s continued rate cuts, at this point, are no longer surprising or intriguing. According to Commerzbank, there is no automatic mechanism for disinflation in Turkey, especially if the economy is to re-accelerate.