Turkish Central Bank says tight monetary policy will continue until inflation outlook improves.

By bne IntelliNews January 30, 2014

Tight monetary policy stance will be sustained until there is a significant improvement in the inflation outlook and if deemed necessary, liquidity policy may be tightened further in order to invert the slope of the yield curve, the Central Bank said on Thursday in the minutes of the emergency monetary policy committee (MPC) meeting earlier this week when it delivered more-than-expected rate hikes.

“The MPC decided to implement a strong monetary tightening and to simplify the operational framework. In this respect, (i) one-week repo rate is increased from 4.5% to 10%, (ii) the Central Bank liquidity will be provided primarily from one-week repo rate instead of the marginal funding rate in the forthcoming period”, the Bank said.

The Bank believes tightening monetary policy under current circumstances will not only contribute to price stability, but also support the macroeconomic stability through a reduction in the exchange rate uncertainty and risk perceptions.

The Central Bank’s aggressive rate hike proved ineffective as TRY weakened against USD on Thursday.

The Central Bank said it would not tolerate any deterioration in the price stability and in order to prevent a deterioration in the inflation expectation and the overall pricing behaviour, it decided that it would be appropriate to deliver a strong and front-loaded monetary tightening. The Bank expects current policy stance to be enough to anchor inflation expectations. January inflation may exceed the market expectations (1.06% m/m, Central Bank Expectations Survey) but tight policy stance should prevent any deterioration in medium term inflation expectations, according to the Bank. The Bank expects underlying inflation to trend downside in subsequent months.

Central Bank Policy Rates

 

Before 29.01.2013

After 29.01.2013

One-week repo (policy rate)

4.50%

10.00%

Overnight Marginal Funding

7.75%

12.00%

Overnight Borrowing

3.50%

8.00%

Overnight Borrowing for Primary Dealers

6.75%

11.50%

Late Liquidity Borrowing

0.00%

0.00%

Late Liquidity Lending

10.25%

15.00%

Source: central bank

   

Related Articles

Erdogan's day in Rome. He came, he saw, he wagged his finger

Turkey’s president, Recep Tayyip Erdogan, on April 29 paid a one-day visit to Rome to attend the fourth ... more

Turkey’s foreign minister meets with UK and German counterparts in Brussels after visiting France and US

Turkey’s foreign minister Hakan Fidan attended the Nato foreign ministers ... more

Turkey ups steel exports 28% in 2024 driven by EU shipments, US takes just small percentage

Turkey upped its steel exports by 27.6% y/y in 2024 to 13.4mn tonnes, according to the Turkish Steel Association (TCUD). Growth was driven by shipments to the European Union (5.9mn tonnes, up ... more

Dismiss