Turkey’s Central Bank cut borrowing costs for the sixth straight month on Aug. 23, lowering its overnight lending rate by 25 basis points despite high inflation and worries about possible credit rating downgrades, underlining that future monetary policy decisions would be conditional on the inflation outlook.
The failed coup attempt and its aftermath increased uncertainty for investors regarding the Turkish economy, prompting the Central Bank to shortly after announce a series of measures to offset the negative effects over the economy. “The adverse impact of domestic developments in mid-July on market indicators has been largely reversed due to improved global risk appetite and the recent measures,” the bank said in a statement. “Moreover, the tight monetary policy stance, the cautious macro-prudential policies and the effective use of the policy instruments laid out in the road map published in August 2015 have increased the resilience of the economy against shocks. Also, considering its contribution to the effectiveness of monetary policy, the [Central Bank] committee decided to take a measured and cautious step towards simplification,” it added.
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