IMF: Dropping Interest Rates to Continue

The International Monetary Fund (IMF) Turkey Desk Representative Hugh Brendenkamp said the Fund expects slow cuts in the interest rates by the Turkish Central Bank in line with the circumstances in 2006. Brendenkamp answered question during a joint CNBC-e and NTV broadcast Wednesday. The drop in the inflation rate is slowing down a little and for this reason, pulling interest rates in line might be less likely. The IMF thinks there is still some room for reduction, but it depends on the market conditions and expectations on inflation. In general, this year, interest rate cuts will be slower, the Fund predicts. Overnight indebting interest rate is 13.50 percent and the inflation expectation for 2006 is slightly over the five percent target. Therefore, expectations are gradually falling. Rising interest rates in developed countries might drive Turkey into a corner in meeting its financial needs Brendenkamp warned, and structural reforms have lost momentum this year. The Fund expects a speedier reform process next year. The most important agenda article for 2006, according to the Fund’s official, is social security reform.

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