Business groups and economists have said the earthquake could cost Ankara up to $100 billion to rebuild housing and infrastructure, while shaving one to two percentage points off economic growth this year. (Additional reporting by Marc Jones in London and Canan Sevgili in Gdynia; Editing by Jonathan Spicer and John Stonestreet)
daren.butler.thomsonreuters.com@reuters.net)) (Refiles to remove superfluous '%' from headline)
By Ezgi Erkoyun and Daren Butler
ISTANBUL, Feb 23 (Reuters) - Turkey's central bank cut
its main interest rate to 8.5% from 9% on Thursday, moving to
cushion the economic impact of a devastating earthquake that
killed more than 43,000 people in country's south on Feb 6.
The cut was expected following the disaster, though some
economists had predicted a considerably bigger reduction.
"It has become even more important to keep financial
conditions supportive to preserve the growth momentum in
industrial production and the positive trend in employment after
the earthquake," the central bank said in a statement.
It also said after its monthly monetary policy committee
meeting that it will closely monitor earthquake-driven supply
and demand imbalances and their impact on inflation, while
mainly stressing the importance of supporting growth and jobs.
The decision had little impact on the lira ,
which traded at 18.8755, barely changed from its early levels.
The currency has touched record lows against the dollar in
recent weeks, but its moves have been far smaller since the
summer due to state control of the currency market.
Even before the quakes, analysts said there could be more
easing ahead of presidential and parliamentary elections due by
June 18 and expected on May 14, and in which President Tayyip
Erdogan is expected to face the biggest political challenge of
his two-decade rule.
The central bank kept rates steady at 9% in December and
January but has now cut them by 1,050 basis points since late
2021.
A 500-bps run of easing last year and subsequent slump in
the lira contributed to inflation soaring above 85%. It dropped
to a still-high 58% in January.
Erdogan has urged monetary stimulus over the last several
years, aiming to achieve price stability by slashing borrowing
costs, boosting exports and flipping chronic current account
deficits to surpluses.
A previous flurry of rate cuts sparked a late-2021 currency
crash. The lira lost 44% versus the dollar that year and a
further 30% in 2022, stoking inflation.
In a Reuters poll of 17 economists, the median forecast was
for a 50-bps cut to minimise the economic hit from the
earthquake. But while nine had expected, in some cases of up to
200 basis points, eight institutions had forecast no change.
Istanbul-based Economist Enver Erkan predicted more cuts
could follow.
"The base effect in inflation creates a confidence interval
from the CBRT (central bank's) perspective, so before the
election, there may be a rate cut again."
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