Turkish Central Bank Defies Government Pressure to Cut Interest Rates Further

October 23, 2014

Turkey’s Monetary Policy Committee kept its one-week repo (8.25%), overnight lending rate (11.25%) and overnight borrowing rate (7.5%) unchanged for a second straight monthly meeting, releasing a statement that affirmed again that “the tight monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook.”  Prior to reduction of one or more of those rates in May, June, July and August, they had been at 10%, 12%, and 8%, but inflation of nearly 9.0% now is four percentage points higher than the medium target.  The statement indicates that the start of disinflation can be detected, but food prices remain “elevated.”  One fear is that premature easing could depress the lira and undermine disinflation.

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



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