Turkish Central Bank keeps interest rates on hold.

By bne IntelliNews December 17, 2013

The Central Bank of Turkey kept its key interest rates unchanged on Tuesday. This was a widely expected decision.

The Bank kept the policy rate (one-week repo) unchanged at 4.5%. The overnight borrowing and lending rates were held constant at 3.5% and 7.75%, respectively, the Central Bank said in a statement released after the regular monthly monetary policy committee meeting on Tuesday.

Latest data show that domestic demand and exports have continued to grow at a moderate pace, the Central Banks said, adding that the present policy framework is leading to an improvement in the current account balance.

The Bank also argues that the cautious monetary policy stance, the macroprudential measures and weak capital flows will gradually bring down the loan growth rates to more reasonable levels in the period ahead.

The CB expects the gradual decline in the current account deficit -excluding gold trade- to continue.

Inflation will continue to fall but core inflation indicators are likely to hover above the inflation target of 5% for some time, according to the Central Bank. The Central Bank also maintains that current policy stance is enough to contain inflationary risks.

Cautious monetary policy stance and additional monetary tightening should continue to be implemented until the medium term inflation outlook is in line with the medium term targets, the Bank said.

The Bank also underlined that it will make sure that interbank money market rates would be kept at around 7.75% and the weighted average cost of funding at 6.75% or higher.

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