Turkey Monetary Policy

Turkey

Turkey: Central Bank leaves rates unchanged following bold tightening in January

February 18, 2014

At its 18 February monetary policy meeting, the Central Bank of the Republic of Turkey (CBRT) decided to maintain the one-week repo rate at 10.00%. The Bank also left the marginal funding rate - previously known as the overnight lending rate - unchanged at 12.00%. It also left the overnight lending facility for primary dealers at 11.50% and the borrowing rate at 8.50%. The decision, which was on par with market expectations, followed the aggressive monetary tightening the Central Bank implemented at an unscheduled monetary policy meeting on 28 January.

In its statement, the CBRT affirmed that a slowdown in loan growth came on the back of the tight monetary stance, fresh macroprudential measures and weak capital flows. The Bank also stated that the current account deficit would likely improve in 2014 due to improved performance in net exports resulting from a recovery in external demand.

In terms of price developments, the Bank acknowledged that inflation will hover above the 5.0% target for some time due to tax adjustments, high food prices and a weak lira. Against this backdrop, the Bank stated that the, "tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook."

FocusEconomics Consensus Forecast panelists see the marginal funding rate ending the year at 12.00%. For 2015, the panel expects the rate to decline to 11.33%. Meanwhile, FocusEconomics Consensus Forecast panelists see the one-week repo rate ending the year at 10.14%. For 2015, the panel expects the rate to decline to 9.80%.


Author: Ricard Torné, Head of Economic Research

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Turkey Monetary Policy February 2014

Note: 1-week repo rate in %, from 25 May 2010 onwards. From January 2008 until 25 May 2010, data refer to overnight borrowing rate.
Source: Central Bank of the Republic of Turkey (CBRT).


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