Turkey: CBRT cuts policy (one-week repo auction) rate to 12% from 14%

  • CBRT announces a larger-than-expected cut to its one-week repo auction rate. 
  • USD/TRY extends its slide with the initial market reaction. 
  • CBRT notes data indicate that recovery in economic activity continues.

The Central Bank of the Republic of Turkey (CBRT) on Thursday announced that it cut the policy rate (one-week repo auction rate) by 200 basis points to 12% from 14%. Although this cut surpassed the market expectation of 150 basis points, the USD/TRY pair slumped to a fresh three-day low of 5.7780 with the initial market reaction. As of writing, the pair was down 0.4% on the day at 5.7830.

Key takeaways from the policy statement

“Recent data indicate that recovery in economic activity continues. Sectoral diffusion of economic activity continues to improve.”

“While favorable effects of improved competitiveness prevail, weakening global economic outlook tempers external demand.”

“Inflation outlook continued to improve while inflation expectations displayed a wide-spread decline.”

“The Committee assesses that maintaining a sustained disinflation process is the key for achieving lower sovereign risk, lower long-term interest rates, and stronger economic recovery.”

“The Central Bank will continue to use all available instruments in pursuit of the price stability and financial stability objectives.”

“It should be emphasized that any new data or information may lead the Committee to revise its stance.”

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