Turkey Monetary Policy October 2016

Turkey

Turkey: Central Bank keeps marginal rate unchanged in October

At its 20 October monetary policy meeting, the Central Bank of the Republic of Turkey (CBRT) decided to keep the marginal funding rate unchanged at 8.25%. At the same time, the Bank kept the one-week repo rate at 7.50% and the overnight borrowing rate at 7.25%. This came on the back of reductions in the marginal funding rate at the previous seven policy meetings. The next meeting is scheduled for 24 November.

The Bank commented that data from the third quarter point to a deterioration of the Turkish economy, mostly due to a deceleration in domestic demand. However, the Bank also added that the recent implementation of structural reforms will support the economy and positive signs will be noticeable particularly in the final quarter of this year. Moreover, demand from the European Union continues to contribute positively to exports and the lagged effect of developments in terms of trade will limit the widening of the current account deficit.

Regarding price developments, the Central Bank stated that the inflation outlook is restrained by recent exchange rate developments. Looking forward, the Bank commented that, “future monetary policy decisions will be conditional on the inflation outlook. Taking into account inflation expectations, pricing behavior and the course of other factors affecting inflation, the cautious monetary policy stance will be maintained.”

FocusEconomics Consensus Forecast panelists see the one-week repo rate ending the year at 7.58%. For 2017, the panel expects the rate to rise to 7.73%. Panelists see the marginal funding rate ending the year at 8.50%. For 2017, the panel expects the rate to rise to 8.81%.


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Turkey Monetary Policy Chart


Turkey Monetary Policy October 2016

Note: 1-week repo rate, overnight borrowing rate and marginal funding rate in %.
Source: Central Bank of the Republic of Turkey (CBRT).


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