Turkey Hikes Key Policy Rate to 17.75%


The Central Bank of Turkey raised its benchmark interest rate by 125bps to 17.75 percent on June 7th, after a surprise 300bps hike last month to support the lira. Also, policymakers said further monetary tightening will be delivered, if needed. Latest data showed the country's annual inflation jumped to 12.15 percent in May, the second-highest since February 2004, due to higher energy prices and a tumbling currency.

The overnight lending rate was raised by 275bps to 19.25 percent and the overnight borrowing rate by 125bps to 16.25 percent. Also, the central bank hiked its late liquidity window rate by 425bps to 20.75 percent.

Statement by the Central Bank of the Republic of Turkey:

Recently released data indicate a rebalancing trend in the economic activity. External demand maintains its strength, while domestic demand displays a more moderate course.

Cost factors have been the main driver of the recent upsurge in inflation. On the other hand, price increases have shown a generalized pattern across subsectors. Despite the mild outlook for demand conditions, elevated levels of inflation and inflation expectations continue to pose risks on the pricing behavior. Accordingly, the Committee decided to further strengthen the monetary tightening to support price stability.

The Central Bank will continue to use all available instruments in pursuit of the price stability objective. Tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement. Inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered.

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

The summary of the Monetary Policy Committee Meeting will be released within five working days.

Turkey Hikes Key Policy Rate to 17.75%


Central Bank of Turkey | Joana Ferreira | joana.ferreira@tradingeconomics.com
6/7/2018 2:28:15 PM