At the Central Bank of the Republic of Turkey (CBRT) Monetary Policy Council's (MPC) meeting on Tuesday, the CBRT held the short-term rates steady. The one-week repo rate will be kept at 7.50 percent, and the overnight lending rate at 10.75 percent, the statement by the MPC said. The bank left is overnight borrowing rate unchanged at 7.25 percent. Also, in the published announcement, the word "simplification" was not used.

According to the CBRT's announcement, the upper and lower bound of the interest corridor and the one-week repurchase agreement (REPO) and reverse REPO rates were held constant. The CBRT statement also included "despite the increasing geopolitical risks, the increase in the European Union's demand has been positively affecting exports. The MPC has assessed that that the announced reform packages by the government that have been put into effect may significantly affect the growth potential [of Turkey]."

Despite expectations regarding an increase in weekly repossession rates keeping short-term interest rates stable, the CBRT has indicated that -- with normalization in global markets -- volatility may decrease and ultimately lead to steps for simplification regarding the one-week repo rates, further pointing to the importance VIX and MOVE indexes.

The main indicator of volatility in the American stock market, VIX, and the index measuring the volatility of American treasury bonds, MOVE, have been increasing since Dec. 15, when the Fed increased interest rates. The VIX index has reached 30.9 from 14.4 in mid-December.

The CBRT's last extraordinary meeting was held on Jan. 29, 2014 when the bank increased the one-week repo rate to 10 percent from 4.5 percent. In the CBRT's meeting this past December, sort-term interest rates were not changed and worries regarding the bank's credibility – noting the bank's inability to reach target inflation rates for the past five years – led officials to underline political independence yet again.

According to a survey published by Reuters, the CBRT was expected to increase interest rates and the one-week repo rate, which currently stands at 7.5 percent, and increasing it to 8.5 percent in the first quarter, 8.75 percent in the second and 9 percent in the third. The lending interest rate at the top of the corridor is expected to remain around 10 percent.