Turkey Monetary Policy


Turkey: Central Bank stays put at October's meeting

October 23, 2014

At its 23 October monetary policy meeting, the Central Bank of the Republic of Turkey (CBRT) decided to keep the one-week repo rate at 8.25% as was expected by the majority of market participants. The Bank also left the borrowing rate unchanged at 7.50%, the marginal funding rate at 11.25%, and the interest rate on borrowing facilities provided for primary dealers via repo transactions at 10.75%.

The Bank noted in its accompanying statement that loan growth remains at reasonable levels as a result of the tight monetary policy and macroprudential measures, and that, despite cooling global demand, exports remain supportive a rebalancing of the current account. Regarding price developments, the CBRT acknowledged that, while high food prices are delaying a remarkable improvement in the inflation outlook, declining commodity prices will have a positive impact on inflationary pressures.

As in previous statements, 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 20 November.

In an attempt to support balanced growth and domestic savings, on 21 October, the Bank announced that it would start paying interest on the Turkish lira component of required reserves of financial institutions. On the day prior to the announcement, the CBRT stated that it would increase the limit for export rediscount credits.

FocusEconomics Consensus Forecast panelists see the one-week repo rate ending the year at 7.83%. For 2015, the panel expects the rate to rise to 8.80%. Meanwhile, FocusEconomics Consensus Forecast panelists see the marginal funding rate ending the year at 11.35%. For 2015, the panel expects the rate to decline slightly to 11.25%.

Author: Ricard Torné, Lead Economist

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Turkey Monetary Policy Chart

Turkey Monetary Policy October 2014

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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