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Turkish central bank expected to ease policy after earthquake

Turkish central bank expected to ease policy after earthquake

Rubble of destroyed building in Antakya, Turkey. (Credit: Mohammed Yassin/L'Orient Today)

ISTANBUL—Turkey's central bank is expected to cut its policy rate by 50 basis points to 8.5 percent this week, a Reuters poll showed on Monday, following massive earthquakes that killed more than 41,000 people in the country's southeast.

Last year, the central bank completed a 500-basis-point easing cycle, which it started to counter a slowdown in the economy, and kept its policy rate steady at 9 percent in December and January.

The median of a Reuters poll of 17 economists showed the central bank will cut its policy rate by 50 basis points to minimize the economic impact of the earthquake.

Nine economists expected a cut in the policy rate of up to 200 basis points, the poll showed, while eight institutions expected the central bank to stand pat.

Turkey and neighboring Syria were rocked by the devastating Feb. 6 earthquake which left millions in need of humanitarian aid, with many survivors left homeless in cold winter weather.

Business groups and economists have said the earthquake could cost Ankara up to $100 billion to rebuild housing and infrastructure while shaving one to two percentage points off economic growth this year.

In a research note, Barclays said the focus is on the economic and political implications of the earthquake, adding that they maintained their expectation for the central bank to keep its policy rate steady at 9 percent.

"Although we maintain our base case of no change in rates in H1 2023, the dovish tweaks in the previous statement and earthquake-related expected economic slowdown increase downside risks on our forecast," Barclays said.

The median of 14 economists who responded to the question about the policy rate at the end of this year showed that tightening is expected from the central bank.

While the forecasts ranged from 6 percent to 45 percent, the median stood at 14.5 percent for the year-end policy rate, according to the poll.

Economists have said the course of monetary policy towards the end of this year is unpredictable due to uncertainty around elections, which are scheduled to be held by June.

The central bank will announce its interest rate decision on Feb. 23.

ISTANBUL—Turkey's central bank is expected to cut its policy rate by 50 basis points to 8.5 percent this week, a Reuters poll showed on Monday, following massive earthquakes that killed more than 41,000 people in the country's southeast.Last year, the central bank completed a 500-basis-point easing cycle, which it started to counter a slowdown in the economy, and kept its policy rate steady at...