The latest repots from Turkey reveal that the state central bank is likely to cut the benchmark interest rate by at least half a percentage point this week. It is for the fourth time the bank reduces the rate in a spasmodic move to stay afloat in the downturn environment. The experts expect the borrowing rate to reduce to 12.5% with the forecasts ranging as high as a full-point cut.

At the moment the bank is working with monetary authorities worldwide to bring the cost of borrowing to a low level as the global credit crisis prompts industrial output to tumble and inflation to slow. Within the last 3 months the benchmark rate in Turkey decreased by a total of 3.75 percentage points with a 2 percentage-point reduction in January.

Some analysts expect the rate to reach nearly 10% by Q4 in case the government agrees to an International Monetary Fund loan accord. If Turkey reaches no deal with the IMF the lira will drop significantly which in turn means that rate cuts will be impossible. Now Turkey is seeking IMF support to finance the current account deficit. Their negations were stopped last month with no information provided on when they would be resumed.