Turkey Monetary Policy February 2016


Central Bank keeps rates unchanged in February for 12th consecutive month

At its 23 February monetary policy meeting, the Central Bank (CBRT) decided to maintain all its main policy rates unaltered for the 12th consecutive month. The CBRT left unchanged the one-week repo rate at 7.50%, the overnight borrowing rate at 7.25% and the marginal funding rate at 10.75%.

February’s statement almost mirrored the one in January. The Bank reaffirmed that amidst a backdrop of tight monetary policy and macro-prudential measures, loan growth remains at reasonable levels. The Bank also noted that demand from the European Union is continuing to bolster exports at an increasing pace, offsetting challenging conditions in other export markets.

Regarding price developments, the Central Bank restated that the evolution in energy prices is having a favorable impact on inflation. That said, other factors, such as food prices, are fanning inflationary pressures. The CBRT decided to maintain a tight liquidity policy for as long as deemed needed.

Looking forward, the Bank commented that, “future monetary policy decisions will be conditional on the inflation outlook.” Moreover, the Bank reaffirmed its monetary policy stance by stating that, “the tight monetary policy stance will be maintained.”

While the decision was expected by market participants, the CBRT missed yet another opportunity to act and simplify its current complex monetary policy framework. In this regard, analysts believe that the current monetary policy stance will remain in place at least until April, when Governor Erdem Basci’s term ends.

FocusEconomics Consensus Forecast panelists see the one-week repo rate ending the year at 9.17%. For 2017, the panel expects the rate to rise to 9.69%. Meanwhile, FocusEconomics Consensus Forecast panelists see the marginal funding rate ending the year at 10.75%. For 2017, the panel expects the rate to rise to 11.88%.

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Turkey Monetary Policy Chart

Turkey Monetary Policy February 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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