Turkey Leaves Benchmark Rate on Hold; Cuts Lending Rate
Turkish central bank decided on August 27th to leave its one-week repo rate unchanged at 8.25 percent, while cutting its overnight lending rate by 75 bps to 11.25 percent. The borrowing rate for primary dealers was also reduced by 75 bps 10.75 percent.
The overnight borrowing rate remained steady at 7.5 percent. The late liquidity window borrowing rate was kept at 0 percent and the lending rate was reduced from 13.5 percent to 12.75 percent.
Is the fourth straight time the central bank cuts rates. In the previous three meetings, the benchmark weekly repo rate was reduced by 175 bps.
Statement by the Central Bank of the Republic of Turkey:
Loan growth continues at reasonable levels in response to the tight monetary policy stance and macroprudential measures. In line with these developments, private final domestic demand follows a modest course.
The adverse impact of exchange rate developments since mid-2013 on annual inflation is gradually tapering off. However, elevated food prices continue to delay the improvement in the inflation outlook. In this respect, the Committee also evaluated the possible impact of the drought and the geopolitical risks on the inflation outlook.
In light of these assessments the Committee decided to maintain the current stance within a more symmetric interest rate corridor. Inflation expectations, pricing behavior and other factors that affect inflation will be closely monitored and the tight monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook.