Turkey’s central bank holds key interest rates

Central Bank of Turkey keeps interest rates steady, leaving one-week repo rate at 7.50 percent, 11 months in row

Photo by: Reuters
Photo by: Reuters

A money changer counts Turkish lira bills at an currency exchange office in central Istanbul, Turkey, August 21, 2015

Updated Jan 20, 2016

The Central Bank of the Republic of Turkey on Tuesday announced that it would hold key interest rates at current levels, the bank said in a statement on its website.

The one-week repo rate will be kept at 7.50 percent, and the overnight lending rate at 10.75 percent, the statement by the Monetary Policy Committee said.

"Annual loan growth continues at reasonable rates in response to the tight monetary policy stance and macroprudential measures. The favorable developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance," the bank's statement said.

"Demand from the European Union economies continues to support exports, despite elevated geopolitical risks in other export markets. The Committee assesses that the implementation of the announced structural reforms would contribute to the potential growth significantly," the statement added.

The bank said that energy price developments affected inflation favorably, while other cost factors limited improvement in the core indicators.

"In the next meeting, if financial markets calm down , the Central Bank will start the process of increasing policy rate and cutting the upper level of interest rate corridor." Finansinvest chief economist Burak Kanli said.

Considering wage developments (minimum wage in the country) and the impact of the uncertainty in global markets, the tight liquidity stance will be maintained as long as it is deemed necessary according to statement.

The bank also said that its future monetary policy decisions would be conditional on the inflation outlook.

"Taking into account inflation expectations, pricing behavior and the course of other factors affecting inflation, the tight monetary policy stance will be maintained," the bank added.