As widely expected, the Central Bank of Turkey kept its one-week repo rate unchanged at 8.25%, held its overnight lending rate and overnight borrowing rate steady at 11.25%, and at 7.50%, respectively.

Inflation will decline throughout 2015, at a faster pace in the first half of the year, the Central Bank said in a statement released after the Monetary Policy Committee’s regular monthly meeting on December 24. Inflation expectations, pricing behaviour and other factors that affect inflation will be closely monitored and the tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook, the Bank reiterated.

Macroprudential measures taken at the beginning of the year and the tight monetary policy stance continue to have a favourable impact on the core inflation trend, moreover, declining commodity prices, in particular oil prices, will contribute to disinflation, according to the Bank.

Loan growth continues at reasonable levels in response to the tight monetary policy stance and macroprudential measures, the Bank said, adding that favourable developments in the terms of trade and the moderate course of consumer loans will contribute to the improvement in the current account balance.

External demand remains weak, while the contribution of domestic demand to growth is at moderate levels, according to the Central Bank which thinks that the implementation of the announced structural reforms would contribute to the potential growth significantly.