Turkey Monetary Policy


Central Bank maintains repo rate, moves policy corridor down

At its 22 January meeting, the Central Bank of the Republic of Turkey (CBRT) left the one-week repo rate at 5.50%. The decision was expected by the market and followed a rate cut in the previous meeting. The Central Bank, however, cut the overnight borrowing rate by 25 basis points to 4.75% and the overnight lending rate by the same amount to 8.75% (8.25% for primary dealers), thus surprising the market, which had widely anticipated the CBRT to maintain both rates - which mark the corridor that defines the CBRT monetary policy - unchanged.

The Central Bank deemed the move necessary as well as an increase in reserve requirements, as credit growth accelerated faster than previously expected amid rising capital inflows.

Once again, the Bank reiterated that the rebalancing process between external and domestic demand continues, with domestic demand growing at a moderate pace and exports expanding despite weakening global activity. The Bank explained that "ongoing uncertainties regarding the global economy necessitate the monetary policy to remain flexible in both directions".

Regarding price developments, the Central Bank stated that inflation may pick up in January due to seasonal factors, but that it will resume its downward trend afterwards. Monetary authorities also reported that they will continue to monitor the effect of the recent hike in administered and energy prices on the medium-term inflation outlook.

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Turkey Monetary Policy Chart

Turkey Monetary Policy January 2013

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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