Turkey Leaves Rates on Hold


Turkish central bank kept its benchmark one-week repo rate at 7.5 percent on August 18th, saying it will maintain a cautious monetary policy stance until there is a significant improvement in the inflation outlook. The bank also decided to adopt a tighter liquidity policy as long as uncertainty in global and domestic markets and volatility in food and energy prices continue to affect financial stability.

The central bank kept the overnight lending rate at 10.75 percent; the overnight borrowing rate at 7.25 percent; and the primary dealers'overnight borrowing rate at 10.25 percent.

Meanwhile, the lira fell to a new record low of 2.88 lira to the dollar after the decision.

Statementby 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. The favorable developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance. External demand remains weak, while domestic demand contributes to growth moderately. The Committee assesses that the implementation of the announced structural reforms would contribute to the potential growth significantly.

Processed food and energy price developments affect inflation favorably in the short run, while exchange rate movements delay the improvement in the core indicators. Considering this delay and taking into account the uncertainty in domestic and global markets and the volatility in energy and food prices, the Committee decided to implement a tighter liquidity policy as long as deemed necessary. Moreover, the Committee also discussed the roadmap to be implemented before and after global monetary policy normalization and decided to publish a strategy document with today’s policy statement.     

Future monetary policy decisions will be conditional on the improvements in the inflation outlook. Inflation expectations, pricing behavior and other factors that affect inflation will be monitored closely and the cautious monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook.

Turkey Leaves Rates on Hold


Central Bank of Turkey | joana.ferreira@tradingeconomics.com
8/18/2015 1:08:08 PM