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Turkey cuts key rate for fourth consecutive month

Xinhua, June 22, 2016 Adjust font size:

Turkish central bank cut its overnight lending rate by 50 basis points to nine percent on Tuesday, marking its fourth straight month of easing, the bank stated on its website.

The bank's monetary policy committee also cut the lending rate from 11 percent to 10.5 percent, while left its benchmark one-week repo rate on hold at 7.5 percent. The overnight borrowing rate also remained unchanged at 7.25 percent.

The committee said in a written statement that it would maintain a tight monetary policy in view of inflation expectations and pricing behavior.

It noted that inflation displayed a marked decline in recent months, mainly due to a favorable course in unprocessed food prices and an improvement in the core inflation trend.

"However, the developments in services inflation and unit labor costs necessitate the maintenance of a tight liquidity stance," the committee warned.

Inflation was 6.58 percent in May, just off a three-year low the previous month. That remains well above the bank's target of five percent.

"Taking into account inflation expectations, pricing behavior and the course of other factors affecting inflation, the tight monetary policy stance will be maintained," said the statement.

The bank underlined that the implementation of the structural reforms would contribute to the potential growth significantly.

It said that with policies increasing the resilience of the economy against shock, like the tight monetary policy stance and the cautious macro-prudential policies, it has decided to take a measured step toward simplification.

Turkish Deputy Prime Minister Numan Kurtulmus told media on Tuesday that Turkish economy should be transformed so that production and employment would be enhanced. The most important obstacle to this target is interest rates.

"Turkish central bank has a rate band. We hope that lower level of interest rates would help to release production potential and boost employment," Kurtulmus said.

Turkish President Erdogan has also shown his favor for lower rates for many times. Endit