Turkish Central Bank keeps interest rates on hold, says policy to stay tight.

By bne IntelliNews February 18, 2014

The Central Bank kept its interest rates unchanged on Tuesday after last month’s aggressive rate hike.

The Bank kept one-week repo rate at 10%, overnight lending rate at 12%, and borrowing rate at 8%. Analysts had not predicted any rate hike prior to Tuesday’s regular monetary policy committee (MPC) meeting. 

Tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook, the Central Bank said in a statement released after the MPC meeting. The Bank expects inflation to hover above the 5% target for some time due to recent tax adjustments, exchange rate developments, and elevated food prices.

Q1 data indicate some deceleration in private final domestic demand, the Bank said, adding that there is a gradual slowdown in loan growth stemming from the tight monetary policy stance, the recent macroprudential measures, and weak capital flows. Economic growth is likely to increase with the help of the recovery in foreign demand, and contribution of net exports, according to the statement.

The Bank also expects a significant improvement in the current account deficit in 2014.

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