UPDATE - Turkish Central Bank cuts benchmark rate to 15%, in line with expectations

UPDATE WITH MORE DETAILS

By Aysu Bicer

ANKARA (AA) - The Turkish Central Bank on Thursday cut its benchmark one-week repo rate by 100 basis points from 16% to 15%, in line with market expectations.

With the latest cut, the monetary authority has lowered the key rate by 400 basis points since September.

The Monetary Policy Committee said recent increases in inflation had been driven by supply-side factors such as rising food and import prices, especially in energy and supply constraints.

In making the decision, the committee "evaluated the analyses to decompose the impact of demand factors that monetary policy can have an effect, core inflation developments and supply shocks."

In September, the CBRT signaled a shift away from headline inflation, with its head Sahap Kavcioglu saying more focus will be given the core "C" inflation measure, which strips out energy, food and some other goods.

The CBRT also said it would consider completing the use of the limited room implied by these factors in December.

It also stressed it will continue to employ "decisively all available instruments until strong indicators point to a permanent fall in inflation and the medium-term 5% target is achieved."

The bank also said strong external demand-driven economic activity remains strong, adding vaccination roll out across the country facilitates the recovery in services, tourism and related sectors, leading to a "more balanced composition in economic activity."

"The improvement in the annualized current account is expected to continue in the rest of the year due to the strong upward trend in exports," it said, adding trend is vital for the price stability objective.

- Erdogan reiterates longstanding opposition to higher interest rates

Among 21 economists surveyed by Anadolu Agency on Tuesday, one predicted a 25-basis-point cut, while five others predicted the bank would cut the rate by 50 basis points, 13 by 100 basis points, and two by 150 basis points.

The median forecast by the economists was a cut in the one-week repo rate of 100 base points, i.e., one percentage point.

Economists have projected the year-end policy rate to be 15%.

In October, Turkey saw an annual increase of 19.89% in consumer prices, and the Central Bank raised its year-end inflation forecast to 18.4% for 2021, up from 14.1% in its previous report.

Speaking to his party's parliamentary group on Wednesday, President Recep Tayyip Erdogan reiterated his longstanding opposition to higher interest rates, declaring: "We will remove the interest rate burden from the backs of our people."