The Turkish lira was little changed against the US dollar and the euro today after the nation’s central bank made a surprise decision to cut interest rates, including the key Marginal Funding Rate.
The Central Bank of the Republic of Turkey decided to cut its main interest rate by 25 basis points to 10.5%. The lending rate has been reduced from 12.25% to 12%. Other rates remained the same.
The central bank explained its decision by the following consideration:
Recently, global volatility has eased to some extent. Moreover, with the use of the policy instruments laid out in the road map published in August 2015 effectively, the need for a wide interest rate corridor has been reduced.
At the same time, the bank stated that monetary policy is likely to remain tight for the time being:
Improvement in the underlying core inflation trend remains limited, necessitating the maintenance of a tight liquidity stance.
USD/TRY rose a little from 2.8756 to 2.8786 as of 16:28 GMT today, rising to 2.8916 intraday. EUR/TRY traded near the opening level of 3.2210 after falling to 3.2086 intraday.
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