Central Bank of Turkey Cuts Interest Rate


At its June 24th, 2014 meeting, Central Bank of Turkey decided to lower the benchmark interest rate by 75 bps to 8.75 percent. It is the second consecutive rate cut, citing recent improvement in global liquidity conditions and lower inflation expectations.

The Monetary Policy Committee decided to leave the marginal funding rate on hold at 12 percent, the interest rate on borrowing facilities provided for primary dealers via repo transactions unchanged at 11.5 percent, and the borrowing rate steady at 8 percent. Also, the borrowing rate has been kept at 0 percent (Late Liquidity Window Interest Rates between 4:00 p.m. – 5:00 p.m.), and the lending rate at 13.5 percent.

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 macro prudential measures. In line with these developments, recent data indicate to a modest course in private final domestic demand. Meanwhile, with the help of the recovery in foreign demand, exports contribute positively to economic growth. The Committee expects that such a demand composition will support disinflation and will lead to a significant improvement in the current account balance in 2014. 

The adverse impact of exchange rate developments since mid-2013 on annual inflation will gradually taper off. With the contribution of base effects, inflation is expected to decline markedly starting from this month. 

In light of these assessments and the recent improvement in global liquidity conditions, the Committee decided to deliver a measured cut in the one-week repo rate. 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.

Central Bank of Turkey Cuts Interest Rate


Central Bank of Turkey | Isabel Felino | isabel.felino@tradingeconomics.com
6/24/2014 12:58:28 PM