Turkey: Central Bank remains on hold
August 1, 2012
At its 19 July meeting, the Central Bank of the Republic of Turkey (CBRT) left the one-week policy rate unchanged at 5.75%, as was expected by the market. The Central Bank also held the overnight borrowing rate steady at 5.00%, and left the overnight lending rate at 11.50% (11.00% for primary dealers). The Bank reiterated that the rebalancing process between external and domestic demand continues and therefore the current account balance is expected to continue to improve. According to the CBRT, domestic demand is displaying some improvement, in line with expectations, while exports continue to expand despite a weakening global outlook. Regarding price developments, the Central Bank warned that inflation will continue to stay above the Bank's target for some time, while adding that, given the prevailing uncertainties in the global economy, "it would be appropriate to preserve the flexibility of the monetary policy". Contrary to previous statements, however, the CBRT refrained from mentioning any need for additional monetary tightening, therefore adopting a less hawkish tone.