Turkey Monetary Policy


Turkey: Central Bank leaves key rates unchanged

June 23, 2015

At its 23 June monetary policy meeting, the Central Bank (CBRT) decided to keep the one-week repo rate unchanged at 7.50%. The decision was in line with market expectations. The Bank also decided to maintain the borrowing rate at 7.25%, the marginal funding rate at 10.75%, and the interest rate on borrowing facilities provided for primary dealers at 10.25%.

Mirroring the previous statement, the CBRT pointed out that loan growth remains at reasonable levels amidst a backdrop of tight monetary policy and macroprudential measures. The Bank added that although external demand is still weak, domestic demand is contributing to moderate growth. Regarding the external sector, the Bank restated that favorable terms of trade and the moderate path of consumer loans continued to facilitate the improvement in the current account balance. In addition, the Bank stated that the implementation of structural reforms will support potential economic growth notably.

Regarding consumer price developments, the Central Bank stated that inflation is expected to fall partly due to a correction in food prices. However, the Bank added that exchange rate pressures have delayed the anticipated improvement. Moreover, the Bank pointed out that recent movements in the lira combined with global uncertainty is making it necessary to maintain the current monetary policy stance. Against this backdrop, the CBRT decided to keep interest rates unchanged.

Looking forward, the Bank commented that, “future monetary policy decisions will be conditional on the improvements in the inflation outlook.” Moreover, the Bank reaffirmed its tight monetary policy stance by, “keeping a flat yield curve, until there is a significant improvement in the inflation outlook.” The next monetary policy meeting is scheduled for 23 July.

FocusEconomics Consensus Forecast panelists see the one-week repo rate ending the year at 7.49%. For 2016, the panel expects the rate to rise to 7.97%. Meanwhile, FocusEconomics Consensus Forecast panelists see the marginal funding rate ending the year at 11.60%. For 2016, the panel expects the rate to increase to 11.75%.

Author: Angela Bouzanis, Senior Economist

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Turkey Monetary Policy Chart

Turkey Monetary Policy June 2015

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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