Turkey’s central bank is likely to reduce interest rates from the end of the third quarter at the earliest, Dutch financial services company ING Group said.
Central Bank governor Şahap Kavcıoğlu told investors on Wednesday that he forecast a significant slowdown in inflation at the end of the third quarter or beginning of the fourth, “so, the expected rate cut should be announced around this time at the earliest”, Muhammet Mercan, ING’s chief economist for Turkey, said in a report on Thursday.
Turkey’s central bank has kept interest rates steady since President Recep Tayyip Erdoğan sacked and replaced rate-hiking governor Naci Ağbal in mid-March. This week, Erdoğan said that it was imperative that borrowing costs for banks were cut in July or August.
The lira slid to a record low of 8.748 per dollar on Friday partly on concern among investors that the central bank will cut rates before inflationary pressures subside. Annual consumer price inflation slowed to 16.6 percent in May from 17.1 percent in April, the Turkish Statistical Institute said on Thursday.