Turkish Central Bank keeps interest rates unchanged

Policy rate, also known as 1-week repo rate, stands at 17% in line with market expectations

Yunus Girgin   | 18.02.2021
Turkish Central Bank keeps interest rates unchanged


The Turkish Central Bank on Thursday kept the policy rate stable in line with market expectations. 

The bank's policy rate – also known as the one-week repo rate – stands at 17%, the bank said in a statement, noting that additional monetary tightening would be delivered if needed.

According to the bank, while the downward effects of the pandemic-related restrictions on the economy have been limited, the slowdown in activity in services and related sectors and uncertainties surrounding the short-run outlook of these sectors have prevailed.

The strengthening domestic demand, due to the cumulative effects of high credit growth during the pandemic, continues to have an adverse effect on the current account balance, the bank noted.

"Nevertheless, credit growth has started to slow down amid tighter financial conditions."

Domestic demand conditions, cumulative cost effects, the exchange rate effects, increasing international food and other commodity prices, and high levels of inflation expectations continue to affect the pricing behavior and inflation outlook adversely, the bank said.

"The decelerating impact of the strong monetary tightening on credit and domestic demand is expected to become more significant, hence the effects of demand and cost factors on inflation are envisaged to wane gradually," it stated.

The tight monetary policy stance will be maintained decisively, taking into account the end-2021 forecast target, for an extended period until strong indicators point to a permanent fall in inflation and price stability, it added.

The balance between the monetary policy rate and actual/expected inflation will be sustained decisively until permanent price stability and 5% target are reached, it assured.

Sustaining the tight monetary policy stance in such a manner, besides attaining permanent price stability, will foster macroeconomic and financial stability positively, the bank noted.

A total of 21 economists surveyed by Anadolu Agency last Friday forecast no change in interest rates except for 6 economists expecting a rise ranging between 0.75 - 1.00 percentage points in one-week repo rate.

In January, the bank also kept its benchmark interest rate constant at 17%.

Meanwhile, last month Turkey saw a 14.97% annual rise in consumer prices, according to the country's statistical authority.

According to its schedule, the bank will hold next Monetary Policy Committee meeting on March 17.

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