Turkey Monetary Policy


Turkey: Central Bank leaves key rates unchanged as expected

July 23, 2015

At its 23 July monetary policy meeting, the Central Bank (CBRT) decided to maintain the one-week repo rate unchanged at 7.50%. The decision was in line with market expectations. The Bank also decided to keep 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%.

Similar to the previous statement, the CBRT stated that loan growth remains at reasonable levels amidst a backdrop of tight monetary policy and macro-prudential measures. The Bank added that even though external demand is still weak, domestic demand is contributing to modest growth. In addition, the Bank pointed out that the implementation of the announced structural reforms will support growth notably. Regarding external developments, 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.

Regarding consumer price developments, the Central Bank stated that inflation is expected to fall partly due to a correction in food prices in the short run. 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 stating it will keep, “a flat yield curve, until there is a significant improvement in the inflation outlook.” The next monetary policy meeting is scheduled for 18 August.

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 July 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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