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As
expected, the bank cut the highest of the multiple interest
rates it uses to set policy to 8.5 percent. It left its
benchmark one-week repo rate unchanged at 7.5 percent.
Fifteen of 17 economists in a Reuters survey had forecast a 25
basis point cut in the overnight rate, while two expected a cut
of 50 points.
President Tayyip Erdogan, who wants stronger consumption-led
growth, has made repeated calls for cheaper credit.
He told commercial lenders this month following a failed coup
that they should not be charging high interest rates, and
promised action against those that "go the wrong way".
The attempted putsch on July 15 and its aftermath have increased
uncertainty for investors and sent Turkey's lira to record lows
against the dollar <TRYTOM=D3>, although the currency has since
recovered somewhat.
"The adverse impact of domestic developments in mid-July on
market indicators has been largely reversed due to improved
global risk appetite and the recent measures," the central bank
said in a statement.
Credit agency Fitch lowered its outlook on Turkey to negative
from stable on Friday, while Moody's said on July 18 it was
putting its rating on review for a possible downgrade to junk
status.
"The prospects for significant structural reform that would
shift the structure of growth from private consumption have
diminished," Fitch said in its statement on Friday.
"The central bank and commercial banks are facing renewed
political pressure on interest rates."
Consumer prices rose 8.79 percent year-on-year in July, up from
7.64 percent in June, meaning inflation is running well above
the central bank's year-end estimate of 7.5 percent.
(Additional reporting by Humeyra Pamuk and Can Sezer; Writing by
Nick Tattersall; editing by John Stonestreet)
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