Turkish central bank keeps easing bias in monetary policy
2013-01-23 12:50:51
Turkey's central bank said on Tuesday it may be necessary to keep an easing bias in monetary policy for a considerable time as economic recovery will be slow and downward pressure on inflation continue.
In the minutes of this month's monetary policy committee meeting, where it cut benchmark rates by one percentage point, the bank said its early recovery scenario was no longer valid and that any further rate cuts may be measured.
The central bank has cut the benchmark borrowing rate by 625 basis points since November in response to a sharp economic slowdown. At its March 19 meeting the bank cut the borrowing rate to a record low of 10.50 from 11.50 percent and cut the lending rate to 13.0 from 14.0 percent.
The bank said in the meeting minutes a decline in domestic investment demand and an improvement in the current account balance was resulting in a rapid decline in Turkey's financing requirement.
'The Committee stated that it might be necessary for monetary policy to maintain an easing bias for a considerable period,' the statement said.
It said that in order to reap the benefits of a short-term expansionary fiscal policy, it was important to commit to a credible medium-term fiscal framework that would ensure debt sustainability and a sound overall fiscal position.
The statement followed gross domestic product data on Tuesday which showed the Turkish economy shrank 6.2 percent in the fourth quarter, underlining the need for rapid government action to boost the economy.
Turkey's government has been holding protracted talks with the International Monetary Fund to replace a $10 billion deal which expired in May and analysts expect it to reach a deal soon in the wake of municipal elections which were held on Sunday.