Turkey Leaves Rates Unchanged


Turkish central bank left its benchmark one-week repo rate on hold at 7.5 percent in April, as high food prices keep pushing inflation up. The decision was expected by markets.

The overnight borrowing rate was left at 7.25 percent; the overnight lending rate was kept at 10.75 percent; and the primary dealers'overnight borrowing rate remained at 10.25 percent. 

Policymakers also decided to take additional measures to defend the currency - the lira lost more than 15 percent to the USD this year. The forex depo lending rate will be reduced by 50 bps to 4 percent for USD and 2 percent for EUR, while the rate it pays banks on lira reserves will go up by 50 bps.

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. 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.

The ongoing cautious monetary policy along with prudent fiscal and macroprudential policies are having a favorable impact on inflation, especially inflation excluding energy and food (core inflation indicators). Yet, uncertainty in global markets and elevated food prices necessitates maintaining the cautious stance in monetary policy. 

Accordingly, the Committee decided to keep the interest rates at current levels. Moreover, it is assessed that a measured cut in the FX deposit lending rates and a measured hike in the partial remuneration rate on Turkish lira required reserves will support financial stability.

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.

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

Turkey Leaves Rates Unchanged


Central Bank of Turkey | Joana Ferreira | joana.ferreira@tradingeconomics.com
4/22/2015 12:58:17 PM