Turkey Cuts Benchmark Interest Rate to 7.75%

Turkish central bank cut the benchmark one-week repo rate by 50 bps to 7.75 percent at its January 20th meeting, as inflation is slowing due to plunge in oil prices. Other key rates were left on hold.
Central Bank of Turkey | Joana Taborda | joana.taborda@tradingeconomics.com 1/20/2015 1:14:35 PM
The marginal funding rate was left on hold at 11.25 percent; the interest rate on borrowing facilities provided for primary dealers via repo transactions was kept at 10.75 percent, and the borrowing rate at 7.5 percent. 

The late liquidity window borrowing rate was kept at 0 percent and the lending rate was left steady at 12.75 percent.

In January of 2014, policymakers raised rates sharply aiming to protect a falling lira. Since then, the benchmark repo rate was cut four times by 225 bps.

Statement by the Central Bank of the Republic of Turkey:

Loan growth continues at reasonable levels in response to the tight monetary policy stance and macroprudential measures. The favorable developments in the terms of trade and the moderate course of consumer loans will contribute to the improvement in the current account balance. External demand remains weak, while domestic demand contributes to growth moderately. The Committee assesses that the implementation of the announced structural reforms would contribute to the potential growth significantly.

The tight monetary policy stance and macroprudential measures continue to have favorable impact on inflation, especially inflation excluding energy and food (core inflation) indicators, and inflation expectations. Moreover, declining commodity prices, in particular oil prices, contribute to disinflation. In light of these positive developments, the Committee has decided on a measured cut in the one week repo rate.

Under the current monetary policy stance, the Committee anticipates that inflation will decline to levels close to the target by mid-2015. Yet, a more persistent reduction in inflation necessitates a cautious approach in monetary policy. In this context, future monetary policy decisions will be conditional on the improvements in the inflation outlook. Inflation expectations, pricing behavior and other factors that affect inflation will be closely monitored and the tight monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook.

Turkey Cuts Benchmark Interest Rate to 7.75%