Duvar English / Reuters

Turkey’s Central Bank cut interest rates to 8.75 percent at a meeting on April 22, risking further lira weakness, in a bigger-than-expected move aimed at limiting the economic damage of the coronavirus crisis.

While the Central Bank acknowledged the depreciating currency, which has tumbled 15 percent this year, it stressed the need to keep credit flowing and to respond to sliding oil prices as it once again cut interest rates by 100 basis points.

Marking its eighth straight rate cut, the Central Bank lowered its benchmark one-week repo rate from 9.75 percent, extending an aggressive easing cycle that has seen it fall 1,525 basis points in less than a year, beyond most analyst forecasts.

The rate cut showed that the bank’s “overriding objective is to support economic growth and it is willing to make sacrifices on the Turkish lira, as well as on financial stability and price stability considerations,” Phoenix Kalen, director of emerging market strategy at Societe Generale, was quoted as saying by Reuters.

The lira hit its weakest level since August 2018 – at the peak of Turkey’s currency crisis – touching 6.999 to the dollar, or around 0.25 percent weaker on the day.

While a weaker lira lifts inflation in import-dependent Turkey, the currency has outperformed most emerging markets this year.

Turkey, the largest economy in the Middle East, is tilting into its second recession in less than two years after a surge in cases of the coronavirus. Ankara has moved to curb its spread by closing schools, bars and cafes, as well as shutting borders and limiting domestic travel.

The bank’s policy committee said in a statement that fallout from the coronavirus outbreak has started to hit trade, tourism and domestic demand so it was “crucial” to ensure markets are functioning and credit is flowing.

Falling global energy prices are lowering inflation expectations in Turkey, which is almost completely dependent on imports to meet its energy needs, it added.

Turkish stocks up at midweek closing session

Meanwhile, Turkey’s benchmark stock index closed the day at 98,170.98 points on April 22, up 0.57 percent from the previous close.

Borsa Istanbul’s BIST 100 index started the day at 98,129.45 points. As of the daily close, it rose 551.98 points from April 21’s close of 97,619.00 points.

The price of one ounce of gold was $1,699.10 by market close, up from $1,671.00 at the previous close, according to data from Borsa Istanbul’s Precious Metals and Diamond Markets.

The price of Brent crude oil was around $20.30 per barrel as of 6 p.m. on April 22.