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

Turkish exporters' association chief dismisses benefits of fast depreciating lira

The fast depreciation that has afflicted the Turkish lira in recent weeks does not bode well for the Turkish economy and the central bank should be more proactive in combating it when necessary, ... more

Turkish central bank releases $500mn of liquidity via new deposit swaps market

The Turkish central bank on January 18 provided around $500mn of liquidity with a maturity of one-week to Turkish lenders at the first auction held under the scope of the newly launched FX ... more

Turkish prosecutors demand lifetime jail sentences for leaders of pro-Kurdish HDP

Turkish prosecutors have demanded up to a 143-year jail sentence for Selahattin Demirtas, co-leader of the pro-Kurdish HDP, party and 83 years for the other co-leader, Figen Yuksekdag, ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss