As widely expected, the central bank of Turkey left all its main interest rates unchanged, but it announced other measures to defend weak lira.

The bank left the one-week repo rate at 7.50%, the overnight borrowing rate at 7.25%, and the overnight lending rate at 10.75%, saying that a measured cut in the FX deposit lending rates and a measured hike in the partial remuneration rate on Turkish lira required reserves will support financial stability.

Inflation expectations, pricing behaviour and other factors that affect inflation will be monitored closely and the cautious monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook, said the bank in a statement released after the monetary policy committee meeting on April 22.

Uncertainty in global markets and elevated food prices necessitates maintaining the cautious stance in monetary policy, the bank warned, however, sounded optimistic about the future course of inflation. The ongoing cautious monetary policy along with prudent fiscal and macroprudential policies are having a favourable impact on inflation, especially inflation excluding energy and food (core inflation indicators), said the bank in the statement.

The favourable developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance, said the bank, adding that external demand remains weak, while domestic demand contributes to growth moderately.

The monetary authority also said on April 22 that the rates applied to banks' one-week maturity borrowings from the central bank were reduced from 4.5% to 4% for USD and from 2.5% to 2% for EUR, effective from April 24. The Turkish lira has been one of the worst performing EM currencies this year.

The bank also announced that the remuneration rate for the required reserves maintained in Turkish liras has been raised by 50 basis points. The implementation will start as of May 8.