Turkey’s negative interest rates likely to harm central bank’s credibility: Moody’s

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Moody's, leading international credit rating institution, is seen on the photo in New York, United States on 21 May, 2014. Cem Ozdel / Anadolu Agency

Turkey’s newly negative real interest rates will likely harm the central bank’s credibility, risk hitting investor confidence and amount to a credit negative for banks’ funding, ratings agency Moody’s said on Monday, according to Reuters.

The central bank cut its policy rate by 75 basis points to 11.25 percent last week, which Moody’s said brought real yields into negative territory given that inflation stood at 11.84 percent in December.

Moody’s added that a recovery in Turkey’s real estate sector is credit positive for banks as it will reduce problem loans and loan-loss provisions while increasing lending volumes.

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