Turkey Monetary Policy


Central Bank leaves key rates unchanged

At its 22 September monetary policy meeting, the Central Bank (CBRT) decided to maintain the one-week repo rate at 7.50%. The decision was broadly in line with market expectations. The Bank also decided to keep the borrowing rate at 7.25% and the marginal funding rate at 10.75%.

Similar to the previous statement, the CBRT commented that amidst a backdrop of tight monetary policy and macro-prudential measures, loan growth remains at moderate levels. The Bank added that even though external demand remained weak in the first half of 2015, domestic demand supported modest growth. Regarding external developments, the Bank reiterated that favorable terms of trade and the moderate path of consumer loans continues to support an improvement in the current account balance. In addition, the Bank pointed out that the composition of growth is expected to change going forward, with greater positive impulse from the external sector as the European Union economics improve.

Regarding prices, the Central Bank stated that energy price developments are moderating inflationary pressures; however, this favorable effect is delayed by exchange rate movements. The Bank added that considering this delay and high levels of uncertainty in domestic as well as global markets, the CBRT decided to maintain a tighter liquidity policy for as long as is deemed needed.

Looking forward, the Bank commented that, “future monetary policy decisions will be conditional on the improvements in the inflation outlook.” Moreover, the Bank reaffirmed its tight monetary policy stance by stating it will keep, “a flat yield curve, until there is a significant improvement in the inflation outlook.” The next monetary policy meeting is scheduled for 21 October.

FocusEconomics Consensus Forecast panelists see the one-week repo rate ending the year at 7.49%. For 2016, the panel expects the rate to rise to 7.97%. Meanwhile, FocusEconomics Consensus Forecast panelists see the marginal funding rate ending the year at 11.60%. For 2016, the panel expects the rate to increase to 11.75%.

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Turkey Monetary Policy Chart

Turkey Monetary Policy September 2015

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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