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Turkish central bank cuts interest again

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Governor of Central Bank of the Republic of Turkey (CBRT), Murat Uysal presents the Inflation Report during a press conference, in Ankara. AFP

Turkish central bank cuts interest again

Turkey's central bank on Tuesday cut its main interest rate again by a full percentage point to 9.75 per cent to support the economy as the new coronavirus impact worldwide grows.

The one-week repo auction rate was trimmed by one percentage point, it said, as developments regarding the coronavirus “have weakened the global growth outlook”.

The bank said its monetary policy committee met two days earlier than was scheduled on Thursday to discuss the potential economic and financial impacts of the coronavirus.

“The pandemic disease is closely monitored for its evolving global impact on capital flows, financial conditions, international trade and commodity prices,” the bank said.

The Turkish lira was down over one per cent to reach 6.49 against the US dollar after the bank’s announcement.

The bank cut the rate as “downside risks on the year-end inflation projection have increased,” it added in a statement.

Inflation in February rose slightly to 12.37 per cent from 12.15 per cent in January.

The latest interest rate cut is the seventh in eight months, coming down from 24 per cent in July.

There have been 47 recorded cases so far of Covid-19 in Turkey.

The bank also announced a series of measures to mitigate the economic fallout, including providing further liquidity to banks if needed.

In a note, London-based Capital Economics said despite the cut, the weaker lira would limit the scope of easing.

“Turkey’s poor external position means that deeper interest rate cuts are likely to put the lira – which has fallen by almost four per cent against the dollar so far this month – under even more pressure,” it said.

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