No Change in Turkish Monetary Policy Stance but Tighter Bias

October 23, 2013

The Monetary Policy Committee maintained the one-week repo rate at 4.5%, the overnight lending rate at 7.75%, and the overnight borrowing rate at 3.5%.  There were no changes either at the previous meeting on September 17.  Before that, the overnight lending rate was raised in July and August by a total of 125 basis points; such had been cut several times between February 2012 and May 2013 by a total of six percentage points.  The last change in the overnight borrowing rate, a cut of 50 bps in May, brought its cumulative decline this year to 150 bps.  Three reductions of the one-week repo rate were administered from December 2012 to May 2013, totaling 125 bps.

A statement from policymakers today laid out several objectives — reductions in the current account deficit, bank lending growth, inflation, and expected inflation plus a more stable lira — and expressed a bias toward further restraint.

The Committee will maintain the cautious monetary policy stance and continue implementing additional monetary tightening at the appropriate frequency until the medium term inflation outlook is in line with the medium term targets.

Officials predict that core inflation will “hover above the inflation target for some time due to the exchange rate volatility observed during the recent months.”

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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