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Ankara / AFP
Turkey’s central bank cut a key interest rate at the debut meeting of its new governor in a move aimed at reassuring skittish investors but that disappointed the government.
The bank said the overnight marginal funding rate was trimmed 50 basis points, as expected by analysts, to 10 percent from 10.50 percent. It left the one-week repurchasing rate unchanged at 7.5 percent, as also widely forecast.
The overnight borrowing rate, at which banks lend to each other at the end of the day, was kept at 7.25 percent.
Wednesday’s meeting had been a key test for brand new governor Murat Cetinkaya, amid concerns he would bow to political pressure to enact far deeper cuts.
“The fact that the central bank refrained from a larger cut indicates the governor will maintain a cautious approach, narrowing the rate corridor gradually, not aggressively,” Piotr Matys, emerging-market strategist at Rabobank, told AFP.
But William Jackson, senior emerging markets economist with Capital Economics, insisted “political pressure no doubt played a role” in Cetinkaya’s move, and warned “with the headline rate likely to edge down further in the coming months, several more cuts are likely.”
Cetinkaya, 40, who formally replaced Erdem Basci on Tuesday, was being watched closely to see if he could defend monetary policy from government interference.
Analysts had warned that, despite a stabilising lira and declining inflation, a deeper than 50 bps cut would have sounded alarm bells over political pressure on the central bank.
For Economy Minister Mustafa Elitas, the bank had not gone far enough. “I had expected the central bank to trigger excitement and the desire to make investments but it did not happen,” he was quoted as saying by Turkish media.