Shock Turkish rate cut

Turkey’s central bank has surprised the markets by cutting the cost of borrowing there; its benchmark interest rate has been reduced to an all-time low of 5.75 percent, a move that will stimulate a still fast-growing economy.

The banks said it was doing that to limit the risk of global economic problems leading to triggering economic stagnation in Turkey.

The Turkish lira slipped in value and did government bond yields and the main Istanbul share index declined.

Analysts were shocked by the cut which was decided at an emergency meeting of its monetary policy committee.

“The danger with this totally out-of-the-box move is that investors will seriously begin to question the credibility of the central bank as an institution, given that foreign investors’ prime concern at present on Turkey are fears of overheating as reflected in the current account deficit,” said Royal Bank of Scotland analyst Timothy Ash in a note.

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