In a presentation by the Central Bank of the Republic of Turkey (CBRT) to bankers, the bank said that leading indicators are not pointing to a recovery in financial activities in the first quarter of 2015. After the Monetary Policy Board (PPK) meeting that was held on Tuesday during which the CBRT announced that short-term interest rates will be kept at the same level, the bank held another meeting yesterday in Ankara with the leading members of the banking sector titled "Financial Outlook and Monetary Policy."
According to the presentation, the improvement in foreign trade rates and moderate consumer loan levels support the current account balance, and while foreign demand continues to be low the increasing domestic demand is supporting growth. Further, cautious monetary and fiscal policy along with the macroeconomic precautions that have been taken have improved core inflation indicators. The presentation also underlined the necessity to continue with a cautious monetary policy due to uncertainties and fluctuations observed in global markets and increases in food prices. The CBRT also said that decisions about monetary policy in the coming months will depend on the speed of improvement in inflation by carefully examining inflation expectations, pricing behaviors and other elements affecting inflation rates. Also, until a significant improvement in inflation rate is observed, tight monetary policies will continue to be applied by keeping the yield curve close to the horizontal plane.
While there is improvement according to data from the first quarter of 2015, the central bank said that high food prices and fluctuations adversely affect Consumer Price Index inflation. There is a limited increase in expectations for inflation rates to increase.
The CBRT's foreign exchange sales, including deals with public energy companies, equaled $2.3 billion in February and $620 million between March 1 and March 11. The new Real Effective Foreign Exchange Index, which expands to the whole of Turkey and is calculated by using the chain average method, will start to be officially published as of April 6.
