Central Bank Keeps The Policy Rate At 7.50 Percent Unchanged

Central Bank of Turkey's Monetary Policy Committee (MPC) has decided to keep the policy rate unchanged at 7.50 percent, as expected.

The Committee also kept short term rates unchanged, marginal funding rate at 10.25 percent, the interest rate on borrowing facilities provided for primary dealers via repo transactions at 10.75 percent, and borrowing rate at 7.25 percent, said in the statement released by the Central Bank on Tuesday.

"Loan growth continues at reasonable levels in response to the tight monetary policy stance and macroprudential measures" MPC said in the statement on the policy rate decision. "The favorable developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance. External demand remains weak, while domestic demand contributes to growth moderately."

The ongoing cautious monetary policy along with prudent fiscal and macroprudential policies were having a favorable impact on inflation, especially inflation excluding energy and food, the MPC said. "Yet, uncertainty in global markets and elevated food prices necessitates maintaining the cautious stance in monetary policy."

"Accordingly, the Committee decided to keep the interest rates at current levels. Moreover, it is assessed 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" the MPC added.

Future monetary policy decisions would be conditional on the improvements in the inflation outlook, while inflation expectations, pricing behavior and other factors that affect inflation would be monitored closely and the cautious monetary policy stance would be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook, the Central Bank stated. - Istanbul