Turkish PM hails central bank move, expects further rate cut

‘The latest reduction in interest rate is a right decision,’ Davutoglu tells a news conference

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Turkish Prime Minister Ahmet Davutoglu on Wednesday welcomed the central bank’s decision to bring down a key interest rate as a step “in the right direction” and expected further cuts next month.

“The latest reduction in interest rate is a right decision,” Davutoglu told a news conference a week after the central bank pruned the one-week repurchase rate to 7.75 percent from 8.25 percent, for the first time in six months.

On Tuesday, the bank’s governor Erdem Basci hinted that the rates might be further cut during the monetary policy committee’s next meeting, with a planned February 24 session likely to be brought forward to February 4.

“We all expect interest rates will be further lowered in the coming days and weeks,” said Davutoglu. “And I believe that a decision will be made in this direction.”

The central bank had aggressively raised interest rates last year to avert an economic crisis following a sharp drop in the value of the Turkish currency lira.

But Turkey’s leaders including President Recep Tayyip Erdogan have increasingly pressed the bank to bring the rates back down so as to stimulate growth ahead of general elections in June.

Davutoglu on Wednesday said the bank was independent but it was not completely “unattached” from the government because it serves as a “consultant” and briefs the cabinet twice a year.