Central Bank of Turkey Leaves Benchmark Interest Rate on Hold at 4.5%

In its July meeting, the Monetary Policy Committee of the Central Bank of the Republic of Turkey decided to leave the one-week repo policy rate unchanged at 4.5 percent. The borrowing rate has been kept at 3.5 percent, while the lending rate has been increased from 6.5 percent to 7.25 percent, to support price and financial stability.
Bank of Turkey | Joana Taborda | joana.taborda@tradingeconomics.com 7/23/2013 12:41:25 PM
Excerpt from the statement by the Monetary Policy Committee:

Capital flows have weakened since May due to increasing uncertainty regarding the global monetary policies. Yet, loan growth continues to hover above the reference rate. The Committee has indicated that tightening the monetary policy stance under these circumstances will support financial stability.

Recently, several developments have affected inflation adversely. Surging unprocessed food prices, rising oil prices, and the increased exchange rate volatility may continue to have adverse impact on inflation in the short term. Although the Committee sees these developments as temporary to a large extent, a measured monetary tightening is deemed necessary in order to contain a deterioration in the pricing behavior. 

In order to support the price and financial stability, the Committee has decided to raise the upper bound of the interest rate corridor. Cautious stance will be maintained until the inflation outlook is in line with the medium term targets. In this respect, additional monetary tightening will be implemented when necessary. 

Due to ongoing uncertainties regarding the global economy and the volatility in capital flows, the Committee has decided to increase the flexibility of the liquidity management. To this end, developments regarding price stability and financial stability will be closely monitored and necessary adjustments will be made in the composition of Turkish lira liquidity provided by the Central Bank.

Central Bank of Turkey Leaves Benchmark Interest Rate on Hold at 4.5%