Turkey Monetary Policy


Central Bank maintains rates unchanged in March

At its 18 March monetary policy meeting, the Central Bank of the Republic of Turkey (CBRT) decided to keep the one-week repo rate at 10.00%. The Bank also left both the marginal funding rate and the overnight lending facility for primary dealers unchanged at 12.00% and 11.50% respectively. The Central Bank maintained the borrowing rate at 8.50%. The decision was on par with market expectations and followed a similar decision in February. In its statement, the CBRT affirmed that loan growth continues to moderate due to the tight monetary policy stance, fresh macroprudential measures and weak capital flows. Against this backdrop, the Bank acknowledged some deceleration in domestic economic activity, which, nevertheless, helps improve the current account deficit. In terms of price developments, the Bank expressed concerns about the country's inflation outlook and noted that inflation will hover above the 5.0% target for some time due to tax adjustments, a weak lira and high food prices. The Bank reaffirmed its monetary policy stance, stating that the, “tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook.” Yarkin Cebeci, an economist with JPMorgan, praised the recent predictability of the Central Bank and highlighted the country's political uncertainty. Cecebi stated: The CBRT is encouraged by the initial results of the monetary tightening delivered in late January, the Bank sees need for continued caution and shows no intention of easing its policy any time soon. […] We think that this cautious approach and the recent improvement in policy predictability will continue supporting the CBRT credibility. However, the Bank needs to stick to this approach in order to achieve a sustained improvement in credibility. […] Furthermore, despite improved CBRT credibility and tighter monetary policies, investors are still not comfortable with the idea of investing in Turkey mainly due to political uncertainty. FocusEconomics Consensus Forecast panelists see the marginal funding rate ending the year at 12.00%. For 2015, the panel expects the rate to decline to 11.50%. Meanwhile, FocusEconomics Consensus Forecast panelists see the one-week repo rate ending the year at 10.09%. For 2015, the panel expects the rate to decline to 9.67%.

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Turkey Monetary Policy Chart

Turkey Monetary Policy March 2014

Note: 1-week repo rate in %, from 25 May 2010 onwards. From January 2008 until 25 May 2010, data refer to overnight borrowing rate.
Source: Central Bank of the Republic of Turkey (CBRT).

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