Turkish Central Bank holds key interest rates steady

ANKARA – Anadolu Agency

The Central Bank announced on March 24 that it would hold key interest rates at their current levels, apart from the marginal funding rate.The one-week repo rate will be kept at 7.50 percent, while the borrowing rate will remain at 7.25 percent. The overnight lending rate will be cut from 10.75 to 10.50 percent, said the statement by the Monetary Policy Committee on the Central Bank website.“Recently, global volatility has eased to some extent. Moreover, with the use of the policy instruments laid out in the road map published in August 2015, the need for a wide interest rate corridor has been reduced,” said the statement.“In this respect, the Committee has decided to take a measured step towards simplification. However, improvement in the underlying core inflation trend remains limited, necessitating the maintenance of a tight liquidity stance,” it added.The Bank also said economic growth, maintained by exports supported by rising demand from EU countries, was favorable.The move was expected by economists, a majority of whom had forecast a hold in rates and a simplification of the monetary policy structure - as promised by the Central Bank in August.“The Central Bank needs to take care of core inflation trend, as there is still an upward pressure there. There is still a need for a large interest rate corridor, so that the basic aim of monetary policy can continue, in order to make domestic markets less fragile to foreign shocks,” said ALB Securities analyst Enver Erkan.“If global economies’ negative trend continues until the end of the year, these kinds of steps could not be sustainable. We expect no market volatility, but the Turkish Lira could be weaker against the dollar in the medium and long term,” Erkan added.