Central Reserve Bank of the Republic of Turkey

September 13, 2018

As telegraphed earlier this month, Turkish monetary authorities tightened monetary policy today in response to the continuing vicious cycle of lira depreciation, which had exceeded 50% year-to-date, and price inflation. They raised the one-week repo rate to 24.0% from 17.75%, exceeded street expectations. This was the fourth increase of 2018 after hikes of 125 basis points in early June, 300 bps in late May, 75 bps in April and 275 basis points combined during 2017. In a released statement, significant risks to price stability were cited that justified strong monetary tightening even in the face of a slowdown in domestic demand. Unsaid, today’s action also flies in the face of the publicly articulated wishes of Turkey’s strongman president.

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

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