Turkish Monetary Policy Unchanged in February

At its February 18th, 2014 meeting, the Central Bank of Turkey decided to leave the benchmark repo rate on hold at 10 percent and the overnight lending rate at 12 percent. Last month, the central bank rose rates sharply aiming to stabilize the lira.

Excerpt from the Statement by the Central Bank of Turkey:

The Committee closely monitors recent deterioration in the inflation outlook and expectations. Inflation is likely to hover above the 5 percent target for some time due to recent tax adjustments, exchange rate developments, and elevated food prices. In order to contain the deterioration in inflation expectations and pricing behavior, the Committee implemented a strong and frontloaded monetary tightening at the interim meeting of January 28, 2014. Tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook. 

There is a gradual slowdown in loan growth stemming from the tight monetary policy stance, the recent macroprudential measures, and weak capital flows. The data regarding the first quarter of 2014 indicate some deceleration in private final domestic demand. Meanwhile, >with the help of the recovery in foreign demand, contribution of net exports to economic growth is expected to increase. Accordingly, the Committee expects a significant improvement in the current account deficit in 2014. 

It should be emphasized that any new data or information may lead the Committee to revise its stance. 

Turkish Monetary Policy Unchanged in February

Joana Taborda | joana.taborda@tradingeconomics.com
2/18/2014 12:46:34 PM