Central Bank of Turkey holds key interest rate

Turkey's central bank says it will hold on to tight monetary policy until there is an improvement in inflation outlook

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

In June’s Monetary Policy Board meeting, the Central Bank of Turkey left the one-week repurchase rate at 7.5 percent, while keeping overnight lending and borrowing rates at 10.75 percent and 7.25 percent respectively, meeting expectations.

After Turkey’s central bank announced that it is keeping three of its main interest rates at the current levels, the Turkish lira showed slight reaction reading at 2.67 against the dollar. 

According to the bank's statement, it will keep its cautious stance in monetary policy as “inflation is expected to decline in the short term owing to a partial correction in food prices.” 

However, “recent movements in the exchange rates have delayed the improvement in the core indicators,” it wrote

"Yet, recent movements in the exchange rates have delayed the improvement in the core indicators," it said.

The current level of Turkey’s interest rates remains a source of debate in the country. Last year in January, the Central Bank of Turkey increased rates drastically, aiming to reduce the losses of the Turkish lira against the dollar and the euro. 

Since then, the central bank has been cutting the rates at a very slow pace, a move highly criticised by the Turkish government, due to the fact that high interest rates put downside pressures on economic growth as well as job creation. 

According to Turkish Economy Minister Nihat Zeybekci, an interest rate cut by the Turkish Central Bank would benefit the Turkish economy. Zeybekci, a vocal critic of the central bank, said that he believes the bank will be able to ease rates with the formation of a new government. 

TRTWorld and agencies