Turkey Monetary Policy March 2016


Turkey: Central Bank cuts the marginal funding rate in March

March 24, 2016

At its 24 March monetary policy meeting, the Central Bank (CBRT) decided to cut the marginal funding rate by 25 basis points to 10.50%. The Bank left the one-week repo rate at 7.50% and the overnight borrowing rate at 7.25%. Although modest, this move caught market analysts by surprise as they had expected the Central Bank to stay on hold.

The Bank defended its decision by citing reduced global volatility, which diminished the need for a wide interest rate corridor. More importantly, the Committee saw this action as a “measured” step toward monetary policy simplification.

Other than that, the Bank reaffirmed that the tight monetary policy and macro-prudential measures are keeping loan growth at reasonable levels. The Bank also noted that demand from the European Union is continuing to support exports at an increasing pace, offsetting challenging conditions in other export markets.

Regarding price developments, the Central Bank stated that improvements in underlying core inflation remain limited. 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.” The next meeting is scheduled for 20 April.

FocusEconomics Consensus Forecast panelists see the one-week repo rate ending the year at 8.76%. For 2017, the panel expects the rate to rise to 9.08%. 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 10.60%.

Author: Ricard Torné, Lead Economist

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Turkey Monetary Policy Chart

Turkey Monetary Policy April 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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