Central Bank of Turkey Cuts Rate

At its May 22nd, 2014 meeting, Turkish central bank decided to cut its one-week repo rate by 50 bps to 9.5 percent, citing an improvement in risk premium indicators and a decline in uncertainties.

The overnight lending rate was kept at 12 percent and the overnight borrowing rate at 8 percent.

Statement by the Central Bank of Turkey:

With the recent decline in uncertainties and improvement in the risk premium indicators, market interest rates have fallen across all maturities. In this regard, the Committee decided on a measured decrease in the one week funding rate. The Committee stated that, with a flat yield curve even after this decision, the monetary policy stance will continue to be tight. Inflation expectations, pricing behavior and other factors that affect inflation will be closely monitored and the tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook. 

Loan growth continues at reasonable levels in response to the tight monetary policy stance and macro prudential measures. In line with these developments, recent data indicate to a modest course in private final domestic demand. Meanwhile, with the help of the recovery in foreign demand, the contribution of net exports to economic growth is expected to increase. The Committee expects that such a demand composition will support disinflation and will lead to a significant improvement in the current account deficit in 2014. 

Central Bank of Turkey Cuts Rate

Central Bank of Turkey | Isabel Felino | isabel.felino@tradingeconomics.com
5/22/2014 12:40:11 PM