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Turkey's Central Bank Resorts To Second Sharp Rate Cut

turkey may31 12sep19 lt

Turkey's central bank slashed its key interest rate by a more-than-expected 325 basis points as it pursues massive policy easing to support economic growth.

The Monetary Policy Committee, led by TCMB Governor Murat Uysal decided to reduce the benchmark policy rate, which is the one-week repo auction rate, to 16.50 percent from 19.75 percent.

Economists had forecast a 275 basis point reduction. The bank had earlier reduced the rate by a massive 425 basis points in July, which was the first cut under the governorship of Uysal.

In July, the Turkish President Recep Tayyip Erdogan removed Murat Cetinkaya from the post of the TCMB Governor following his refusal to cut interest rates to help stimulate economic growth.

Erdogan said over the weekend that interest rates will fall to single-digit in a short time.

"The extent of the monetary tightness will be determined by considering the indicators of the underlying inflation trend to ensure the continuation of the disinflation process," the bank said.

Inflation had slowed to a 15-month low of 15.01 percent in August. The bank said domestic demand conditions and the level of monetary tightness continue to support disinflation.

The central bank expects the gradual economic recovery to continue with the help of the disinflation trend and the improvement in financial conditions.

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