Central Bank of Turkey Maintains Tight Monetary Policy Settings

December 24, 2014

As expected, monetary officials in Turkey left their overnight lending rate at 11.25%, the overnight borrowing rate at 7.5%, and the key one-week repo rate at 8.25% after December’s policy review.  Inflation hovering near 9% is well above next year’s desired 6%, but a released statement today expresses optimism that inflation will recede at a quickening pace during the first half of next year because of lower commodity costs and an assumed drop in core price pressure from sub-trend growth.  The tight monetary policy stance is limiting growth in bank lending to reasonable levels, and the current account deficit should shrink.  The statement urges implementation of needed structural reforms and promises to monitor measures of expected inflation closely.  Between June and August, the repo rate was cut by 175 basis points, and the overnight borrowing and lending rates fell by 50 bps and 75 bps, but the central bank has stopped reducing interest rates until a significant improvement of inflation is secured.

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



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