Interest rates

Turkey's Central Bank lowered its main interest rate by 50 basis points yesterday in response to slowing inflation and in the face of increased political pressure for softer monetary policy before a June parliamentary election.

The Board of Romania's Central Bank (BNR) decided on Wednesday to slash the key interest rate from 2.75% to 2.5% as of January 8, according to a release issued for AGERPRES.

Photo credit (c) LUCIAN TUDOSE / AGERPRES ARCHIVE

The Central Bank is not expected to change the interest rates in today’s last annual Monetary Policy Committee (PPK) meeting. Despite the expectation of a fall in inflation rates, markets are not predicting that the Central Bank will lower interest rates soon.

The Turkish Lira recovered Dec. 17 after the Central Bank reassured the market that monetary tightening would continue until inflation improves.

The currency hit record lows on Dec. 16 due to an emerging market sell-off and domestic political tensions.

The Turkish Central Bank will not dare, one assumes, to opt for a new interest rate reduction because of the uncertainty in the global financial environment. For this reason, market experts do not expect any interest rate changes in the Monetary Policy Committee (PPK) meeting to be held tomorrow.

The Central Bank left its key interest rates unchanged on Sept. 25 despite slowing economic growth

With the decrease in domestic demand, particularly in the housing, houseware and automotive sectors, the pressure on the Central Bank for interest rate reduction will remain effective There has been an apparent stagnation in the markets and even a recession in sales, and recent economic statistics confirm this recession.

The Turkish Central Bank has kept its main policy interest rate the same, but trimmed its interest rate corridor’s upper band by 0.75 points, triggering a boost to the Turkish Lira.

This week, on one hand, markets will be monitoring the statements of authorities who affect global economy, and on the other hand, domestically, they will closely follow the Central Bank’s interest rate decision. The expectation in the markets is that despite all the negative circumstances, the Central Bank will continue lowering the interest rate. 

On my first day on the job as a market economist in 2006, my boss, an economics Ph.D. who had worked at the World Bank and the Central Bank of Turkey before joining the ranks of finance, pulled me aside to explain the difference between academic and market economists.