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Turkey’s central bank lowers interest rates by 425 basis points

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Turkey’s central bank sharply cut its key interest rate by a more than expected 425 basis points to 19.75 percent on Thursday to spur a recession-hit economy, its first step away from the emergency stance it adopted during last year’s currency crisis, Reuters reported.

The bank lowered its benchmark one-week repo rate from 24 percent, where it had remained since September, when a collapse in the Turkish lira pushed inflation to a 15-year high above 25 percent, prompting aggressive rate hikes.

Inflation has since dropped below 16 percent, opening the door to the first monetary easing in four-and-a-half years in the Middle East’s largest economy.

The lira, which has been volatile this year after a nearly 30 percent drop in 2018, tumbled immediately after the policy announcement to as much as 5.78 against US dollar but quickly bounced back to 5.66.

Economists expected a median cut of 250 basis points, or 2.5 percentage points, according to a Reuters poll last week that showed a wide range of views.

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