Turkish One-Week Repo Rate Remains on Hold

November 11, 2010

Turkey’s 7.0% one-week repo rate was left at 7.0%, it level since a 25-basis point cut a year ago, and analysts expect another year to pass before it is raised.  A statement released by the Central Bank of the Republic of Turkey reiterated its expectation that current levels will be maintained “for some time” and that low levels are probable “for a long time.”  Downward-trending overall CPI inflation and the expectation of In-target core inflation were cited.  The on-year CPI rise in October was 8.6%, down from 9.2% in September.  GDP, which is being propelled by strong domestic demand, rose 10.3% between 2Q09 and 2Q10, but officials are confident that capacity usage will lie below pre-crisis levels for a long time.  The statement expresses concern about excessive capital inflows, and officials in response cut the overnight borrowing rate to 1.75% from 5.75%, thus expanding its discount relative to the overnight lending rate from 300 basis points to 700 bps.  During the world recession, Turkish rates were lowered 1025 basis points between November 2008 and November 2009.

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One Response to “Turkish One-Week Repo Rate Remains on Hold”

  1. […] followed a 400 basis point cut of the overnight borrowing rate unveiled the day before and reviewed here.  The increase of reserve requirements should remove close to $1.5 billion equivalent from the […]