Central Bank reduces interests by 50 basis points

The Central Bank reduced the policy rate to 8.25 percent with a 50 basis point cut after lowering the interest rate by 100 basis points in April.

The Bank has now lowered the rate by a total of 1,525 basis points over the last eight Monetary Policy Committee (MPC) meetings, with 375 basis points shaved off since the beginning of the year. While experts believe the decision is market-friendly, the recent optimistic outlook on

TRY and the normalization steps had a role in the decision. The economic slowdown, which began in April, signaled a V-shape recovery with more normalization steps in May, according to the MPC statement. The Bank’s year-end inflation estimate stands at 7.4 percent. The committee’s next meeting will be on June 25.

The MPC statement revealed that while uncertainty in global economic recovery is very high, the Bank is closely following the normalization steps in other countries. Economic activity has begun to slow since the middle of March in line with foreign trade, tourism, and domestic demand, according to the statement. “While the weakening in economic activity became more pronounced in April, highfrequency indicators for the first half of May display signs of bottoming-out following the steps taken towards partial normalization. Although consumer inflation might follow a slightly higher course in the short-term due to seasonal and pandemic-related effects on food prices, demand-driven disinflationary effects will be more prevalent in the second half of the year. The inflation outlook is considered to be in line with the year-end inflation projection.”