State Bank lowers policy rate amid economic improvements

The State Bank has recently made a significant decision to lower its policy rate by 150 basis points to 20.5 percent after maintaining it at a high of 22 percent for some time. This move comes following positive changes in the economy, including a decrease in May's inflation figures and improvements in the external sector and international reserves.

Throughout the year, there has been growing pressure on the bank to adjust its monetary policy stance as inflation showed signs of decline. Lowering the interest rates was deemed necessary to prevent further negative impacts on the economy caused by high lending rates. The Finance Minister stressed the importance of aligning rate adjustments with inflation trends.

Market expectations varied regarding the extent of the rate cut, with many analysts not predicting a reduction of more than 100 basis points. The State Bank's decision reflects its confidence in the improving economic conditions and the potential for a new agreement with the IMF. This move coincides with budget announcements and ongoing discussions for an IMF bailout package.

The decision to lower rates was made based on the favorable recent inflation trends, although there are concerns about potential inflation risks from upcoming budget changes and energy price adjustments. The impact of previous monetary tightening measures is expected to help alleviate inflationary pressures.

While the rate cut indicates a temporary control over inflation, the State Bank remains focused on its medium-term goal of achieving 5-7 percent inflation by September 2025. The reduction in rates is expected to result in savings for the government, reduced expenses for businesses, and potential positive effects on real estate and stock markets, although immediate investments in key sectors may not see a significant boost.

The State Bank's decision to lower the policy rate reflects a positive outlook on the economy and aims to support economic growth. This move is expected to have various impacts on different sectors, ultimately contributing to the country's financial stability and development.