Central Bank of the Republic of Turkey: No Rate Change but….

November 19, 2013

Key Turkish interest rates — a 4.5% one-week repo rate, a 7.75% overnight lending rate and a 3.5% overnight borrowing rate — were left unchanged by the Monetary Policy Committee.  However, a decision was reached to eliminate monthly repo rates in hopes of reducing selling pressure on the lira, which has boosted inflation.

Inflation indicators are likely to hover above the inflation target for some time due to the exchange rate volatility observed during the recent months. In order to contain the impact of these developments on the pricing behavior, the Committee decided to strengthen the cautious stance and reduce the volatility of short term money market rates. To this end, one month repo auctions will be terminated, as a result of which interbank money market rates will materialize around 7.75 percent.

The overnight lending rate was previously increased by 75 basis points in July and another 50 bps in August.  The overnight borrowing rate has been 3.5% since a 50-bp cut in May 2013, and the one week repo rate was last moved in May, too, when such was lowered 50 bps.  Consumer prices rose 7.7% in the year to October.

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



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