UPDATE - Turkish Central Bank cuts policy rate amid virus fears

UPDATES WITH MORE DETAILS

By Aysu Bicer and Tuba Sahin

ANKARA (AA) - Addressing concerns of the fallout from coronavirus, in an extraordinary meeting on Tuesday the Turkish Central Bank Monetary Policy Committee cut its policy rate from 10.75 to 9.75.

The bank was set to meet on Thursday, but with fears of the virus mounting, and cases climbing worldwide, the meeting was moved up.

The bank underlined that the downside risks of the year-end inflation projection have risen, led by a mild trend in core inflation indicators, a sharp fall in international commodity prices, and the increased disinflationary effects of aggregate demand conditions.

"The Committee assesses that maintaining a sustained disinflation process is a key factor for achieving lower sovereign risk, lower long-term interest rates, and stronger economic recovery," it said, adding that new data or information may lead it to revise its stance.

In a separate statement, the Central Bank announced moves to cushion the virus's likely economic and financial fallout.

The moves aim to enhance predictability, secure uninterrupted credit flow to the corporate sector, and boost the cash flow of exporting firms.

It will provide banks with as much liquidity as they need through intraday and overnight standing facilities, it said.

Liquidity may be injected into the market through repo auctions with maturities up to 91 days when needed, along with one-week repo auctions, the bank said.

Central banks such as U.S. Federal Reserve and the Bank of England have also taken urgent measures to contain fallout from coronavirus.

It decided to hold conventional – multi-price – swap auctions with maturities of one, three and six months, against euros and gold in addition to U.S. dollars.

The bank also reduced FX reserve requirement ratios by 500 basis points for lenders that meet real credit growth conditions. Thus, the lenders will be provided with FX and gold liquidity of nearly $5.1 billion.

Additional liquidity facilities are being offered to lenders to secure uninterrupted credit flow to the corporate sector linked to the amount of credit provided to the real sector.