Turkey's Central Bank holds interest rates constant

By Muhammed Ali Gurtas

ANKARA

Turkey’s Central Bank will keep its short-term interest rates constant, the bank’s Monetary Policy Committee (MPC) announced on Thursday.

The bank said in a statement that the one-week repo rate, also known as the bank's policy rate, was held at 8 percent.

The marginal funding and overnight borrowing rates were also kept steady at 9.25 and 7.25 percent, respectively.

The bank also kept late liquidity window interest rates unchanged -- the borrowing rate at 0 percent, and the lending rate at 12.25 percent.

Thursday's MPC meeting is the first of eight meetings scheduled for the year. Future meetings are set for March 7, April 25, June 7, July 24, Sept. 13, Oct. 25, and Dec. 13.

"Recently released data indicate that economic activity maintains its strength," said the bank. "Domestic demand continues to expand and external demand contributes positively to exports."

According to the country's statistical authority TurkStat, Turkey's economy expanded 5.3 percent in the first quarter and 5.4 percent in the second quarter of 2017.

In the third quarter, Turkey’s economy became the fastest-growing among G20 countries, showing double-digit (11.1 percent) growth performance.

Last year, Turkey's exports reached $157.1 billion in value -- the second-highest export volume in the republic's history -- a 10.2 percent annual rise.

"Current elevated levels of inflation and inflation expectations continue to pose risks on the pricing behavior," the bank said, noting that the policy committee decided to maintain its tight monetary policy stance.

"The Central Bank will continue to use all available instruments in pursuit of the price stability objective," the bank said.

Annual inflation in December 2017 was 11.92 percent, down from November's 12.98 percent, which was the highest annual rise in consumer prices since 2005.

Last year, the lowest annual inflation was seen in January with 9.22 percent, while the minimum rise in the 13 years from 2005 to 2017 was seen in March 2011, with 3.99 percent.

"Tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement, independent of base effects and temporary factors, and becomes consistent with the targets," the bank said.

"Inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered," it added.

According to the bank's annual schedule, the bank will release four inflation reports on Jan. 30, April 30, July 31, and Oct. 31 this year.