The Central Bank cut rates, lowers reserve requirements

The Monetary Policy Committee (MPC) of the Central Bank cut benchmark rates October 15 by 50 bps to 6.75% as expected. The Bank also cut the TRL reserve requirement by one percent, freeing up an additional 3.3 billion Lira for company credit. The overall tone of the accompanying policy statement was tighter compared to previous ones. The MPC noted for the first time that “it might consider slowing the pace of rate cuts in the next meeting, depending on data and market developments.” However, the MPC retained language that indicates its primary concern is the sustainability of the recovery process: “monetary policy will have to maintain an easing bias for a long time.”

The overnight rate is expected to bottom-out at 6.25-6.50 percent. The Central Bank and many analysts are treating the macro-data as a sign of a weak and fragile economic recovery. Goldman Sachs, however, believes Turkey’s recovery is much stronger and points to an anticipated GDP growth of 3-3.5 percent in 2010.  

Source: Hurriyet Daily

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