Central Bank of the Republic of Turkey: No Further Rate Hikes This Time
March 16, 2017
A statement released after the latest policy meeting observes that inflation has risen sharply lately, notes that monetary policy has been tightened sharply over recent months, and elects to stay with the status quo this time. Since November 25, the overnight funding rate has been raised a full percentage point to 9.25%, and the one-week repo rate has increased 50 basis points to 8.5%. The overnight borrowing rate stays at 7.25%. Economic growth is led by exports, and higher inflation reflects volatile food prices and cost-push forces in part generated by a weak exchange rate. The forward guidance provided by the statement proclaims, “Tight stance in monetary policy will be maintained until inflation outlook displays a significant improvement. Inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered.” Geopolitical strains between Turkey and the rest of Europe have become more acute.
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