Central Bank of the Republic of Turkey: No Further Interest Rate Hike Now
March 18, 2014
Excessive inflation, fed in part by selling pressure on the lira, a big current account deficit, and lessening investor ease with emerging market investments prompted a “strong and front-loaded monetary tightening” in late January that saw hikes of 425 basis points in Turkey’s overnight lending rate, 450 bps in the overnight borrowing rate, and 550 bps in the key one-week repo rate. The newly elevated levels of 8.0%, 12.0% and 10.0%, respectively, were then maintained after scheduled meetings in February and now March. CPI inflation of 7.9% in February versus a 5.5% target is not expected to crest until near midyear according to a bank statement released today. The statement observes slower growth in bank lending and domestic demand but projects strengthening net exports. Market commentaries by street analysts suspect that monetary officials were influenced by the vocal opposition to high interest rates from politicians in this political season that sees a number of elections upcoming.
Copyright 2014, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Turkey
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