Turkey Monetary Policy


Central Bank leaves key rates unchanged as election looms

At its 21 October monetary policy meeting, the Central Bank (CBRT) decided to maintain the one-week repo rate at 7.50% as Turkey’s snap election on 1 November approaches. The decision was 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%.

Mirroring the previous statement, the CBRT commented that amidst a backdrop of tight monetary policy and macro-prudential measures, loan growth remains at moderate levels. In addition, an improvement has been seen in the current account balance due to the course of consumer loans and developments in terms of trade. The Bank added that even though external demand remained weak in the first half of 2015, domestic demand supported modest growth. 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 economies 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 tight liquidity policy for as long as is deemed needed.

Looking forward, the Bank commented that, “future monetary policy decisions will be conditional on the inflation outlook.” Moreover, the Bank reaffirmed its tight monetary policy stance by stating that, “the tight monetary policy stance will be maintained.” The next monetary policy meeting is scheduled for 24 November.

FocusEconomics Consensus Forecast panelists see the one-week repo rate ending the year at 8.30%. For 2016, the panel expects the rate to rise to 9.33%. Meanwhile, FocusEconomics Consensus Forecast panelists see the marginal funding rate ending the year at 11.54%. For 2016, the panel expects the rate to increase to 11.71%.

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