Press Release on Interest Rates – 24/05/2016, (2016-20)

No: 2016-20

24 May 2016

DECISION OF THE MONETARY POLICY COMMITTEE

Participating Committee Members

Murat Çetinkaya (Governor), Ahmet Faruk Aysan, Erkan Kilimci, Necati Şahin, Abdullah Yavaş, Mehmet Yörükoğlu. 

The Monetary Policy Committee (the Committee) has decided to set the short term interest rates as follows:

a) Overnight Interest Rates: Marginal Funding Rate has been reduced from 10 percent to 9.50 percent, and borrowing rate has been kept at 7.25 percent,
b) One-week repo rate has been kept at 7.5 percent,
c) Late Liquidity Window Interest Rates (between 4:00 p.m. – 5:00 p.m.): Borrowing rate has been kept at 0 percent, and lending rate has been reduced from 11.50 percent to 11 percent.

Annual loan growth continues at reasonable rates in response to the tight monetary policy stance and macroprudential measures. The favorable developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance. While domestic demand continues to have a positive impact on growth, demand from the European Union economies continues to support exports. Accordingly economic activity displays a moderate and stable course of growth. The Committee assesses that the implementation of the structural reforms would contribute to the potential growth significantly.

Recently, the global volatility has increased to some extent. The Committee assesses that the tight monetary policy stance, the cautious macroprudential policies and the effective use of the policy instruments laid out in the road map published in August 2015 increase the resilience of the economy against shocks. In this respect, the Committee decided to take a measured step towards simplification.

Recently, inflation has displayed a marked decline, mainly due to unprocessed food prices. However, improvement in the underlying core inflation trend remains limited, necessitating the maintenance of a tight liquidity stance.

Future monetary policy decisions will be conditional on the inflation outlook. Taking into account inflation expectations, pricing behavior and the course of other factors affecting inflation, the tight monetary policy stance will be maintained.

It should be emphasized that any new data or information may lead the Committee to revise its stance.

The summary of the Monetary Policy Committee Meeting will be released within five working days.