Turkish Central bank cuts one-week repo rate to 9.5%, citing improvement in risk premiums.

By bne IntelliNews May 22, 2014

In a surprise move, the Central Bank of Turkey has cut the one-week repo rate to 9.5% from 10% while keeping the overnight borrowing and lending rates on hold at 12% and 8%, respectively. Most analysts had expected the Bank to keep its main rate unchanged at 10%. The surprise move came weeks after PM Recep Tayyip Erdogan called for a rate cut despite stubbornly high inflation. Erdogan, expected to compete in the presidential race in August and now struggling with the country’s deadliest industrial accident ever that killed 301 miners, does not want to see the economy slow down ahead of the polls.

With the recent decline in uncertainties and improvement in the risk premium indicators, market interest rates have fallen across all maturities and in this regard, the Monetary Police Committee (MPC) decided on a measured decrease in the one week funding rate, the Central Bank said in a statement released after the regular monthly MPC meeting on Thursday. The monetary policy stance will continue to be tight, the Bank said, adding that the tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook.

Recent data points to a modest course in private final domestic demand, and with the help of the recovery in foreign demand, the contribution of net exports to economic growth is expected to increase, the Bank stressed. Such a demand composition will support disinflation and will lead to a significant improvement in the current account deficit in 2014, the Bank added.

One week repo rate (%)
Date Lending rate
May-2010 7.00
Dec-2010 6.50
Jan-2011 6.25
Aug-2011 5.75
Dec-2012 5.50
Apr-2013 5.00
May-2013 4.50
Jan-2014 10.00
May-2014 9.50
Source: Central Bank

Related Articles

Turkish footwear manufacturers step up investments in Uzbekistan’s leather and footwear industries

Turkish footwear manufacturers are stepping up their investments in Uzbekistan’s leather and footwear industries, according to local reports. A $1mn investment in the manufacture of leather, ... more

Shipping companies latest to feel effects of “West’s very tight blockade against Turkey’s banking system", says report

Shipping companies are the latest to feel the effects of “the West’s very tight blockade against the Turkish banking system”, according to a report by Turkish publication Ekonomim. In ... more

“Panic buys” push up white goods sales in Turkey as consumers fret over impending credit card curbs

White goods sales in Turkey moved up 22% y/y in January as anxious consumers rushed to stores to make “panic buys” ahead of possible government measures to curb credit card spending, according to ... more

Dismiss