Central Bank of the Republic of Turkey

June 23, 2015

Turkish monetary policy remains restrictive despite several rate cuts most recently in February when the one-week repo rate and overnight borrowing rate were sliced 25 basis points to 7.5% and 7.25%, respectively, while the overnight lending rate was cut 50 bps to 10.75%.  In early 2014, those rates stood at 10.0%, 8.0%, and 12.0%.  Monetary officials continue to forecast a near-term decline in CPI inflation but released a statement after today’s policy meeting that expresses some frustration that the fall has not been steeper.  Consumer prices rose 8.1% in the year to May.  The stickiness of inflation is blamed on lira depreciation and “uncertainty in global markets and volatility in energy and food prices.”  Accordingly, rates were not reduced this month as many analysts were anticipating.  The statement ties future policy easing to inflation.

Future monetary policy decisions will be conditional on the improvements in the inflation outlook. Inflation expectations, pricing behavior and other factors that affect inflation will be monitored closely and the cautious monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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