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| TURKEY: Rate Cut Underscores Economic Confidence |
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2005-02-10 15:09:56 |
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Turkey's central bank cut key overnight interest rates for the second time this year on Wednesday but stressed that fiscal discipline and IMF-backed reforms were vital if inflation goals are to be met.
The bank cut the overnight borrowing rate to 16.5 percent from 17 percent and the overnight lending rate to 20.5 percent from 21 percent, underscoring its benign outlook following lower-than-expected January inflation data. This was the second interest rate cut in as many months. The bank cut the rates by one percentage point on Jan. 11.
However, the central bank warned in its monthly outlook, issued later in the day, that any slowdown in the government's structural reforms could undermine the falling trend in inflation, though it said this does not yet threaten the 2005 inflation target.
The central bank said budget discipline in 2005 should keep domestic demand in check but called on the government to proceed with the structural reforms it has promised the IMF. “It's necessary to re-emphasize the importance of fiscal discipline and structural reforms on the process of falling inflation,” the bank said in its outlook. “Even if it's temporary, any slowdown in the steps needed for fiscal discipline and structural reforms carries the possibility of stemming the falling trend in inflation, even if no change is expected in the main trend.”
Source: Turkish Daily News
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The Event: SEEF 2004
