Turkey Holds Repo Rate At 8%, Hikes Lending Rate To 9.25%

The Central Bank of Turkey held its benchmark one-week repo rate at 8 percent on January 24th, while markets were expecting a 50bps hike, and raised its lending rate by 75bps to 9.25 percent, in an attempt to support the currency and to contain a deterioration in the inflation outlook.
Central Bank of Turkey | Joana Ferreira | joana.ferreira@tradingeconomics.com 1/24/2017 11:23:56 AM
The central bank kept its overnight borrowing rate at 7.25 percent and increased the rate at its late liquidity window to 11 percent from 10 percent.

Statement by the Central Bank of the Republic of Turkey:

Recently released data indicate a partial recovery in the economic activity. Demand from the European Union economies continues to contribute positively to exports, while domestic demand displays a weaker course. With the supportive measures and incentives provided recently, the recovery in the economic activity is expected to continue at a moderate pace. The Committee assesses that the implementation of the structural reforms would contribute to the potential growth significantly.

Aggregate demand developments support disinflation. Yet, excessive fluctuations in exchange rates since the previous meeting have increased the upside risks regarding the inflation outlook. The significant rise in inflation is expected to continue in the short term due to lagged pass-through effects and the volatility in food prices. Accordingly, the Committee decided to strengthen the monetary tightening in order to contain the deterioration in the inflation outlook.  

The Central Bank will continue to use all available instruments in pursuit of the price stability objective. Future monetary policy decisions will be conditional on the inflation outlook. Inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered. Moreover, necessary liquidity measures will be taken in case of unhealthy pricing behavior in the foreign exchange market that cannot be justified by economic fundamentals.

It should be emphasized that any new data or information may lead the Committee to revise its stance.

The summary of the Monetary Policy Committee Meeting will be released within five working days.

Turkey Holds Repo Rate At 8%, Hikes Lending Rate To 9.25%