Central Bank of the Republic of Turkey

April 25, 2018

Turkish monetary policy was tightened slightly at the latest review. Most of the central bank’s interest rates — an 8.0% one-week repo, a 7.25% marginal borrowing rate, a 9.25% overnight marginal funding rate, and a rate of zero percent for the late liquidity¬†window borrowing rate — were not changed. But a released statement announced a 75-basis point increase of the late liquidity window lending rate to 13.5%. The previous increase of any sort came in January 2017 when the main overnight marginal funding rate was lifted from 8.5% to its current level. Officials claim today’s policy tweak is justified by an increase of inflation risk: “Current elevated levels of inflation and inflation expectations continue to pose risks on the pricing behavior. Upside movements in import prices have increased such risks.” A more forceful tightening of policy in the future is moreover possible.

 Tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement, independent of base effects and temporary factors, and becomes consistent with the targets. Inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

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