Turkish Central Bank: Global uncertainty, high food prices necessitate cautious monetary stance

By bne IntelliNews March 18, 2015

Uncertainty in global markets and elevated food prices necessitates maintaining the cautious stance in monetary policy, accordingly the Monetary Policy Committee decided to keep interest rates at current levels, said the Central Bank on March 18 in a presentation to economists.

On March 17, the Central Bank kept its main rate (one-week repo) steady at 7.50% and left its overnight lending rate and borrowing rate unchanged at 10.75% and 7.25%, respectively.

Future monetary policy decisions will be conditional on the improvements in the inflation outlook, reiterated the Bank in the presentation published on its website, adding that cautious monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook. It argues that the on-going cautious monetary policy along with prudent fiscal and macroprudential policies are having a favourable impact on inflation, especially core inflation indicators.

Here are the other highlights from the March 18 presentation;

* Inflation expectations have edged up slightly

* Loans continue to expand at a reasonable pace due to cautious monetary policy stance

* Leading indicators do not point to a recovery in the economic activity during the first quarter

*Export orders remain weak, while domestic orders show some softening, partly reflecting adverse weather conditions

* Downward trend in trade indicators reflects geopolitical developments, price effects as well as weak domestic and external demand

* Impact of lower oil prices has started to become visible on the current account balances

* Further significant improvement in current account deficit is expected in 2015

* Consumer loans grow at a slower pace than commercial loans contributing to rebalancing process and financial stability

* Non-core liabilities of the financial institutions have been shifting towards longer maturities since the announcement of the RR measures

February CPI by Main Expenditure Groups (%)
  Weights m/m y/y
Headline 100 0.71 7.55
Food and non-alcoholic beverages 24.25 2.59 13.70
Alcoholic beverages and tobacco 4.82 -0.44 3.91
Clothing and footwear 7.38 -6.58 7.40
Housing, utilities 15.79 0.46 7.50
Furnishings, household equipment 7.78 0.23 7.37
Health 2.57 0.82 8.29
Transportation 15.38 1.77 -1.49
Communications 4.38 0.94 3.95
Recreation and culture 3.54 0.58 6.03
Education 2.53 -0.08 7.96
Hotels, cafes and restaurants 6.98 1.06 12.66
Miscellaneous goods and services 4.60 0.59 9.18
Source: tuik      

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