ISTANBUL – Turkey’s central bank is expected to trim its policy rate by 25 basis points to 8%, a Reuters poll showed on Friday, a relatively limited cut in an aggressive easing cycle that has lasted nearly a year.
The bank has slashed its key interest rate by 1,575 basis points since July last year, when it stood at 24%. The stimulus was at first meant to pull the economy out of a recession last year, and is now blunting fallout from the coronavirus pandemic.
In the Reuters poll of 16 economists, the median estimate was for a cut to 8%. Estimates ranged from no change in the policy rate at 8.25%, to a 50-point cut to 7.75%.
Since the outbreak hit Turkey, the central bank has slashed rates by 250 basis points, bought record amounts of government bonds and provided some funding below the policy rate.
Enver Erkan, economist at Tera Yatirim, said the policy flexibility had narrowed after the year-long monetary easing.
“Interest rates are below inflation and we have gotten close to the central bank’s year-end inflation estimate,” he said, adding that the bank would likely stick to small cuts or stand pat in coming months.
With the outbreak hammering domestic demand, tourism and exports, the bank last month lowered its inflation forecast for end-2020 to 7.4%.
Plummeting global oil prices have pushed inflation down in import-dependent Turkey, while on the other hand a depreciation in the lira raises import prices. Turkey’s currency hit an all-time low of 7.2690 versus the dollar in May before rallying.
The median estimate of 11 economists for the policy rate at year-end stood at 7.75%, down from 8% last month, with forecasts ranging between 8% and 7.25%.
The bank will announce its rate decision on June 25 at 1100 GMT.