Turkey Monetary Policy January 2016


Turkey: Central Bank in January refrains again from simplifying its monetary policy scheme

January 19, 2016

At its 19 January monetary policy meeting, the Central Bank (CBRT) decided to maintain all its main policy rates unchanged for the 11th consecutive month. The CBRT left unchanged the one-week repo rate at 7.50%, the overnight borrowing rate at 7.25% and the marginal funding rate at 10.75%. Although the decision did not completely surprise market analysts, the CBRT missed another opportunity to act and simplify its current complex monetary policy framework.

Almost mirroring the previous statement, the CBRT stated that amidst a backdrop of tight monetary policy and macro-prudential measures, loan growth remains at reasonable levels. The Bank also noted that demand from the European Union is continuing to bolster exports, offsetting challenging conditions in other export markets.

Regarding price developments, the Central Bank stated that while energy price dynamics are having a favorable impact on inflationary pressures, rising wages and other factors such as volatility in energy and unprocessed food prices are propping up inflation. The CBRT decided to maintain a tight liquidity policy for as long as 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.”

FocusEconomics Consensus Forecast panelists see the one-week repo rate ending the year at 9.28%. For 2017, the panel expects the rate to rise to 9.46%. Meanwhile, FocusEconomics Consensus Forecast panelists see the marginal funding rate ending the year at 10.96%. For 2017, the panel expects the rate to rise to 11.44%.

Author: Ricard Torné, Lead Economist

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Turkey Monetary Policy Chart

Turkey Monetary Policy January 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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