Turkey foresees inflation falling, lowers borrowing rates by 50 bps, minutes report

By Richard Connell

New York, Dec. 1 - The Monetary Policy Committee of the Central Bank of Turkey cut its overnight borrowing rate by 50 basis points at its Nov. 19 meeting in anticipation of a rapid decline in inflation, according to minutes released Monday.

The committee began by pointing out that consumer prices increased by 2.6% in October, based on a rise in food and energy prices, pushing annual inflation up to 11.99%.

The committee also noted the adverse impact that the global financial crisis has had on the Turkish economy, as industrial production has dropped 5.5% from the same period a year ago, and that this trend will continue in the fourth quarter.

It was also noted that both investment spending and the Turkish export market share had declined significantly.

The committee decided to cut rates by 50 bps in response to its forecast that inflation would fall rapidly, based on both the domestic economic slowdown and a decline in food, oil and commodity prices.

The overnight borrowing rate now stands at 16.25%.

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