Turkey Cuts Rates for 3rd Straight Meeting


At its July 17th meeting, Turkey’s central bank lowered the benchmark one-week repo rate by 50 bps to 8.25 percent, saying the impact of exchange rate developments since mid-2013 on inflation is gradually tapering off.

Policymakers also decided to leave the marginal funding rate unchanged at 12 percent; the interest rate on borrowing facilities provided for primary dealers via repo transactions on hold at 11.5 percent while the borrowing rate has been reduced from 8 percent to 7.50 percent. The late liquidity borrowing rate has been kept at 0 percent and the lending rate at 13.5 percent.  

Statement by the Central Bank of the Republic of Turkey:

Loan growth continues at reasonable levels in response to the tight monetary policy stance and macroprudential measures. In line with these developments, recent data point to a modest course in private final domestic demand. Meanwhile, with the help of the recovery in foreign demand, exports contribute positively to economic growth. The Committee expects that such a demand composition will support disinflation and will lead to a significant improvement in the current account balance in 2014. 

The adverse impact of exchange rate developments since mid-2013 on annual inflation is gradually tapering off. Recently, elevated food prices have been the main factor limiting the pace of decline in inflation. In light of these assessments and the recent improvement in global liquidity conditions, the Committee decided to deliver a measured cut in the one-week repo rate. Inflation expectations, pricing behavior and other factors that affect inflation will be closely monitored and the tight monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook. 

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

Turkey Cuts Rates for 3rd Straight Meeting


Central Bank of Turkey | Joana Taborda | joana.taborda@tradingeconomics.com
7/17/2014 12:20:00 PM