Turkish Monetary Policy Rates Unchanged
March 27, 2012
The Central Bank of the Republic of Turkey left unchanged the 5.75% 7-day repo rate, the 11.5% overnight lending rate, which had been cut in February by 100 basis points, and the 5.0% overnight borrowing rate, which has been at that level since August 2011. The 7-day repo rate has been at a record low since last August. Turkey’s monetary policy has been a controversial one, embodying low interest rates despite inflation that has accelerated from 9.5% in November to 10.5% in December, 10.6% in January, and 10.4% last month. These double-digit levels for the past three report months compare with an inflation target of 5%. Officials have been juggling the overnight rate spread, now 650 basis points, to contain inflation, while attempting to retain enough flexibility to also safeguard economic growth. Officials expect core inflation to ebb later this year.
While not changing central bank interest rates, this month’s policy meeting produced decisions to implement “a new round of additional monetary tightening in order to eliminate the impact of recent cost developments on inflation expectations. Factors affecting inflation will be closely monitored in the forthcoming period and additional monetary tightening will be repeated, when necessary. Taking the liquidity projections into account, the ranges for weekly and monthly Turkish lira funding have been revised. In addition, certain revisions regarding the fraction of required reserves that can be held in gold have been approved.”
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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