By CentralBankNews.info
Turkey’s central bank maintained its policy stance, keeping its key rates unchanged, saying the current stance was appropriate to contain inflationary risks but “emphasized that any new data or information may lead the Committee to revise its stance.”
The Central Bank of the Republic of Turkey (CBRT), which has tightened policy since May to protect its currency and contain inflation, said interbank money market rates would remain close to 7.75 percent while the weighted average cost of funding would be at 6.75 percent or above.
Turkey’s central bank conducts a slightly unorthodox monetary policy and in November, for example, it dropped the reference to its one-week repo rate as a policy rate and started putting more emphasis on the overnight lending rate, which acts as a ceiling in it interest rate corridor.
The overnight lending rate was maintained at 7.75 percent while the borrowing rate, the floor in the corridor, was held at 3.5 percent along with the rate of borrowing facilities for primary dealers at 6.75 percent. The one-week repo rate was held at 4.5 percent.
Turkey’s inflation rate, which has been boosted by a depreciation of its lira since the U.S. Federal Reserve warned it May that it was considering tapering its asset purchases, has declined in recent months and fell further to 7.3 percent in November from 7.71 percent in October.
“Inflation is expected to fall further in the forthcoming period,” the central bank said, adding that core inflation may hover above the bank’s 5.0 percent target “for some time.”
In its latest inflation forecast from this month, the central bank revised upward its inflation forecast to 6.8 percent by end-2013 and 5.3 percent end-2014, partly due to exchange rate changes and higher oil price assumptions.
“The Committee stated that the cautious monetary policy stance should be maintained until the inflation outlook is in line with the medium term targets,” the bank said.
But the bank also said that domestic demand and exports were continuing to grow at a moderate pace and the “moderate decline in the current account deficit excluding gold trade is expected to continue.”
Turkey’s Gross Domestic Product rose by 0.9 percent in the third quarter from the second quarter for annual growth of 4.4 percent while the current account narrowed to US$ 2.89 billion in October from $3.37 billion in September.
