Turkish rate cuts should be gradual

ISTANBUL – Turkish interest rates should not be cut too rapidly if the country is to achieve its inflation goals, central bank Governor Durmus Yilmaz said in comments published yesterday. «There are really sectors that are hurt by the level of the lira and interest rates. But we have set out a program and are implementing it,» Yilmaz said in comments published in several Turkish newspapers. Earlier this month the central bank cut its benchmark borrowing rate by a larger-than-expected 50 basis points and slashed the lending rate 75 basis points. «When we consider demand components, consumer, automotive and housing loans, interest rates should not be lowered too rapidly if we are to reach our goal,» Yilmaz said in comments carried by the financial daily Dunya. The central bank has set an inflation target of 4 percent for this year. In September, annual consumer price inflation stood at 7.12 percent. In the minutes of its last monetary policy committee meeting, released on Friday, the central bank reiterated further easing would depend on global liquidity, external demand, public spending and other factors affecting the inflation outlook. It also reiterated that food prices were an important risk to the outlook. The central bank raised interest rates sharply last year in the face of a rise in inflation which triggered capital flight from Turkish markets and a slide in the lira.