Central Bank of Turkey (CBT) cuts its O/N borrowing rate by 50bp to 6.75%, in line with expectations. The MPC said it would maintain the easing bias but future interest rate cuts could be slower, depending on economic indicators and developments.
This suggests that we are getting closer to the end of the interest rate cutting cycle. However, we see room for additional cuts and the MPC decision to maintain the easing bias lends support to our view. We expect the O/N to be cut to 6.25% by end-2009 and to 5.25% by end-2010. We expect a positive market reaction on Friday, in particular to the MPC's intention of slowing future rate cuts.