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Thursday, the Central Bank of the Republic of Turkey cut its borrowing rate to a record low of 13% from 15% to support the economy. The Monetary Policy Committee meeting presided by governor Durmus Yilmaz also decided to lower lending rate to 15.50% from 17.50%.
In a statement accompanying the decision, the central bank said, "Recent readings indicate that the slowdown in the domestic economic activity has further intensified. Latest forecasts suggest that ongoing problems in international credit markets and the global economy will last longer than previously envisaged. Therefore, downward pressures on both domestic and external demand and inflation will continue."
In the third quarter, Turkish annual economic growth slowed to 0.5%, marking its lowest rate in six years due to global economic crisis.
Moreover, the central bank said significant drops in oil and other commodity prices are having a favorable impact on disinflation. The monetary policy committee predicts that inflation will be close to the target by mid-2009, and that the probability of undershooting the target by the end of the year has increased.
The Committee has judged that moving forward a sizeable portion of the rate cuts envisaged for the coming months would help offset the tightening in financial conditions.
Further, the central bank said it will continue to take the necessary measures to contain the adverse effects of the global financial turmoil on the domestic economy, provided that they do not conflict with the price stability objective.
"Uncertainties regarding the impact of the problems in financial markets on the real economy remain at high levels," the central bank said.
With regard to the future monetary policy decision, the apex bank said the extent and the timing of a possible future rate cut will depend on the factors affecting inflation outlook. "It should be emphasized that any new data or information related to the inflation outlook may lead the committee to revise its stance."
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