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Turkey’s Central Bank to cut interest rates at next Monetary Policy Committee meeting

Turkey’s Central Bank to cut interest rates at next Monetary Policy Committee meeting

ANKARA:  Turkey’s Central Bank will cut interest rates further at the next Monetary Policy Committee meeting on Feb. 24.

Nearly 75 percent of those who participated in the survey expected an interest rate cut although their estimations of the amount of the cut varied. The expectations of reduction change between 25 to 50 basis points. The committee reduced the rate by 50 basis points at the last committee meeting on Jan. 20. However, the bank was criticized but government officials, including President Recep Tayyip Erdoğan, said that the cut was still not enough to support growth.

According to businessmen and various economists speaking to AA, the government’s low interest rate policy supports consumption and investment decisions, and in general, supports all kinds of economic activities from real sector investments and loan demands, to real estate sales and employment rates. Banking Regulation and Supervision Agency (BDDK) data also supports this opinion, as it demonstrates an increase in loan demands.

The Central Bank of the Republic of Turkey’s (CBRT) decision to decrease one-week repo rates will also trigger a decrease in loan interests of banks, which means real estate, vehicles and consumer loans will be offered at lower costs to the citizen. Furthermore, the business world increases their investments during such periods, thus creating new employment opportunities.

According to BDDK’s data, when the CBRT decreased the interest rate to 4.5 percent in 2013, the mortgage loans increased by 29 percent when compared to the previous year, which boosted property purchases by 65 percent in the same year.

In 2014, the growth in mortgage loans was slower, as interest rates were between 8 percent and 10 percent, the increase in mortgage loans was only 14 percent and property sales increased by only 1 percent when compared to 2013.