CBRT lowers overnight lending rate by 50bps, likely to continue cutting rates in near-term

Today, the Turkish central bank lowered the overnight lending rate by 50bps, on par with the consensus expectations. The CBT’s meeting today was the first one under the new governor. The central bank’s move of narrowing the overnight corridor is because of the improved global risk confidence. Furthermore, the central bank stated that going forward, the stance of monetary policy will be conditional on the outlook of inflation.

Turkey’s inflation in March decelerated to 7.5% from January’s 9.5%. But the central bank stated that the rebound in core inflation has been limited.  Moreover, there is a certain way to decelerate inflation to the target rate of 5%, plus or minus 2 percentage points.

“We believe the CBRT is likely to continue reducing the overnight lending rates in the near term, at least if the TRY remains fairly unchanged as we expect or even strengthens a bit”, said Nordea Bank.