Turkish Central Bank says future policy decision will be conditional on inflation outlook

By bne IntelliNews February 25, 2015

Future monetary policy decisions will be conditional on the improvements in the inflation outlook, said the Central Bank on February 25 in a presentation on its website, reiterating that cautious monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook.

A more persistent reduction in inflation necessitates a cautious approach in monetary policy, said the Bank, noting that taking into account the elevated volatility in food and energy prices, its Monetary Policy Committee this week decided to cut the interest rates at a measured scale.

The on-going cautious monetary policy along with prudent fiscal and macroprudential policies are having a favourable impact on core inflation indicators, the Bank suggested. The Bank warned that while the lower level of commodity prices still supports the decline in inflation, elevated volatility in food and energy prices can affect headline inflation adversely.

On February 24, the Bank trimmed the main one-week repo rate for the second straight month in a row, also reduced other rates. It lowered the one-week repo by 25bp to 7.50%, cut its overnight lending rate from 11.25% to 10.75% and overnight borrowing rate from 7.50% to 7.25%.

Leading indicators point to a moderate economic growth, said the Bank in the presentation, stressing that export growth is constrained by geopolitical developments and weak external demand.

Current account balance has improved steadily since 2011and a further significant improvement is expected in 2015, according to the Bank.

Finally, the Bank stated that consumer loans grow at a slower pace than commercial loans contributing to rebalancing process and financial stability.

Policy Rate (%)
Date one-week repo
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
Jun-14 8.75
Jul-14 8.25
Jan-15 7.75
Feb-15 7.50
Source: Central Bank

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