As widely anticipated, the Central Bank of Turkey on Thursday cut its one-week repo rate by 50bps to 8.25%. The Bank kept the overnight lending rate at 12% but lowered its overnight borrowing rate to 7.5% from 8%.
The adverse impact of exchange rate developments since mid-2013 on annual inflation is gradually tapering off, but elevated food prices have been the main factor limiting the pace of decline in inflation, the Bank said in statement released after the Monetary Policy Committee meeting. In light of these assessments and the recent improvement in global liquidity conditions, the Committee decided to deliver a measured cut in the one-week repo rate, the Bank added.
Recent data point to a modest course in private final domestic demand, meanwhile, with the help of the recovery in foreign demand, exports contribute positively to economic growth, the Bank said, adding that such a demand composition will support disinflation and will lead to a significant improvement in the current account balance in 2014.
The tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook, the Central Bank reiterated.
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