Turkey's Central Bank keeps key rates unchanged, hikes LLW rate

Published 26.04.2017 14:13
Updated 26.04.2017 15:21
Turkey's Central Bank headquarters is seen in Ankara January 24, 2014. (Reuters Photo)
Turkey's Central Bank headquarters is seen in Ankara January 24, 2014. (Reuters Photo)

The Central Bank of the Republic of Turkey (CBRT) kept all benchmark rates unchanged at the Monetary Policy Committee's meeting on Wednesday, whereas the late liquidity window (LLW) rate was increased by 50 basis points from 11.75 percent to 12.25 percent.

"Late liquidity window interest rates [between 4.00 p.m.-5.00 p.m.]: Borrowing rate has been kept at 0 percent, while lending rate has been increased from 11.75 percent to 12.25 percent," the bank said.

The bank left benchmark one-week repo rate, overnight borrowing rate (lower band of interest rate corridor) and overnight lending rate (upper band of interest rate corridor) at 8.00, 7.25 and 9.25 percent, respectively.

Following CBRT's decision, the Turkish lira gained against the U.S. dollar with the exchange rate decreasing from 3.59 to 3.56 level.

The bank said recent data indicates a gradual recovery in economic activity with the back of increasing EU demand for Turkish exports and recovering in domestic demand.

"With the supportive measures and incentives provided recently, economic activity is expected to gain further pace in the forthcoming period. The committee assesses that the implementation of the structural reforms would contribute to the potential growth significantly.

"Cost push pressures and the volatility in food prices in recent months have led to a sharp increase in inflation. Although the recent improvement in the risk appetite contains some of the upside pressures from cost factors, current elevated levels of inflation pose risks on the pricing behavior," the bank added.

The bank said the committee decided to strengthen the monetary tightening in order to contain deterioration in the inflation outlook.

The bank vowed it would continue to use all available instruments in pursuit of its price stability objective.

"Tight stance in monetary policy will be maintained until inflation outlook displays a significant improvement.

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

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