The bank was set to meet on March 19, but with fears of the virus mounting, and cases climbing worldwide, the meeting was moved up.
“As developments regarding the spread of the coronavirus have weakened global growth outlook, central banks in advanced and emerging economies have taken coordinated expansionary measures. The pandemic disease is closely monitored for its evolving global impact on capital flows, financial conditions, international trade, and commodity prices,” said a statement by the MPC on March 17.
“Despite the recent depreciation in the Turkish Lira due to global developments, the sharp fall in international commodity prices, especially crude oil and metal prices, affects inflation outlook favorably. Furthermore, due to the weakening in global trade and measures such as travel restrictions, the disinflationary effect of aggregate demand conditions has increased to some extent. In this respect, it is considered that downside risks on the year-end inflation projection have increased. Accordingly, the committee decided to make a 100-basis point cut in the policy rate,” it added.
Flexibility in liquidity management
In a separate statement, the bank announced that it will make moves to cushion the virus’s likely economic and financial fallout.
It will provide banks with as much liquidity as they need through intraday and overnight standing facilities, it said.
Liquidity may be injected into the market through repo auctions with maturities up to 91 days when needed, along with one-week repo auctions, the bank said.
These measures aim to boost predictability by providing banks with flexibility in the lira and foreign exchange liquidity management, offering targeted additional liquidity facilities to banks to secure uninterrupted credit flow to the corporate sector.
Central banks such as the U.S. Federal Reserve and the Bank of England have also taken urgent measures to contain the fallout from the coronavirus.
Last year, it held eight MPC meetings, as interest rates fell 1,200 basis points over the course of the year, from 24 percent to 12 percent.
TCMB also injected 29 billion Turkish Liras (nearly $4.61 billion) into the domestic market at a one-week repo auction on March 13.
Turkey will unveil measures to reduce the economic impact of the coronavirus outbreak this week, Treasury and Finance Minister Berat Albayrak announced on March 16.
Hurriyet Daily News