Turkey: Central Bank leaves rates unchanged
October 5, 2011
At its 20 September meeting, the Monetary Policy Committee (MPC) left the policy rate unchanged at 5.75%, as was expected by market analysts. The Central Bank emphasized its readiness to loosen monetary policy if global economic woes intensify, exacerbating the slowdown in domestic economic activity. In addition, the MPC expects the current account balance to significantly improve in the next quarters. On 4 October, monetary authorities cut the reserve requirement ratios (RRR) by 50 basis points for all FX deposits up to three years, which, according to Central Bank calculations, should bring an additional USD 1.3 billion of liquidity to the banking system. Monetary authorities cut the reserve ratio for longer-term liabilities by 250 basis points. The move is designed to ease liquidity and help banks to extend the maturity of their foreign currency financing. On the same day, the MPC raised the amount of banks' lira reserve requirement ratio, which can be held in foreign exchange from 10% to 20%. According to the Central Bank, the move should increase FX reserves at the Bank by USD 3.6 billion if the facility in question is utilized in full.