January 22, 2020 / 1:47 PM / a month ago

Turkish central bank to set monetary policy in line with falling inflation

A general view shows the Alpine resort of Davos, Switzerland January 21, 2020. REUTERS/Arnd Wiegmann

DAVOS, Switzerland (Reuters) - Turkey’s central bank will set monetary policy in line with developments in inflation, which is expected to fall to single digits by the middle of this year, the bank’s governor Murat Uysal said on Wednesday.

Uysal was responding to a question by broadcaster NTV about the criteria for reducing interest rates to single figures, after the bank trimmed its policy rate by 1,275 basis points to 11.25% in the last six months.

President Tayyip Erdogan, a self-described enemy of interest rates, has called for single-digit interest rates in 2020 after sacking the former governor last year for not listening to instructions on monetary policy.

Uysal said the bank had entered a period of fine tuning and that future steps will be data-dependent.

“I can say that we will see single-digit levels in inflation starting in the middle of the year. Our monetary policy will be formed in accordance with that,” he said.

The latest rate move last week brought the bank’s policy rate below inflation, which stood at 11.8% in December, but Uysal said that the outlook was for positive real rates considering that inflation is forecast to fall to single digits.

Reporting by Ali Kucukgocmen, editing by Dominic Evans

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