Turkish cbank sees opportunity to cut rates, says worst yet to come

In an interview with news channel CNN Turk on Friday, Yilmaz said the worst outcome of the current economic crisis has not been seen yet, the AFP reported.

The central bank will maintain price stability and will take measures that are in line with mid- and long-term inflation targets, and Turkey's medium and long-term inflation targets can be met, said Yilmaz.

He added, however, that the bank cannot ignore price stability even during economic contraction.

"We are applying the necessary policy. We are saying that we see the possibility to cut rates and we are cutting them," Yilmaz was quoted as saying by Reuters.

The central bank has cut rates twice in consecutive meetings by a total of 175 basis points, the last cut in a surprise 125 basis-point move after growth in the third quarter fell to a six-year low.

The current global economic crisis has bit into Turkey's economy, and the business community has stepped up its calls for a new deal with the International Monetary Fund after the previous $10 billion agreement ran out last May. An IMF mission is currently in Ankara to discuss the terms of a new deal.

Yilmaz said he would not comment on the sum of a possible agreement with the international lender, but said that a new deal would bring about needed fiscal discipline.

"If Turkey had not signed the last two deals with the IMF it would not be where it is today. The IMF could provide us with some discipline, which could be seen as necessary," he said.

Yilmaz said that unlike the U.S. Federal Reserve, the Turkish central bank's balance sheets are growing at a measured rate as the bank is not setting up any major rescue plans.