Turkish Monetary Policy Eased Again

July 17, 2014

Following cuts of 50 basis points in May and 75 bps in June, the Monetary Policy Committee at the Central Bank of the Republic of Turkey authorized a 50-basis point cut of its one-week repo rate.  The overnight borrowing rate, which hadn’t been changed at those two earlier meetings, was this time sliced to 7.5% from 8.0%, but the overnight lending rate was kept at 12.0%, its level since a 425-bp hike after an unplanned meeting in late January.  In January to support a floundering Turkish lira, the one-week repo was also lifted to 10.0% from 4.5%, and the overnight borrowing rate was lifted by 450 basis points from 3.5% previously.

Turkey’s political leaders have been outspokenly critical of the high interest rates especially now that the lira has stabilized.  A statement from officials doesn’t mention political pressure, blames elevated inflation on food costs and the lira’s prior decline, predicts falling inflation in the future, observes “improved global liquidity,” and calls the policy stance “tight.”  The next policy announcement is scheduled for August 27.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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