Central Bank Does Not Change Interest Rate, Exchange Rate of Dollar Sees 5.96 TRY

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The Central Bank of the Republic of Turkey (TCMB) Monetary Policy Committee has kept the political interest rate, which is also termed the one-week repo rate, fixed at its current level of 24 percent.

After the Central Bank announced its decision, the depreciation in Turkish Lira (TRY) has gathered pace. As a first response to the decision of the bank, the exchange rate of US Dollar increased from 5.89 to 5.96 TRY.

In its statement dated March 6, 2019, the Central Bank kept the political interest rate fixed at its current level of 24 percent.

The only difference between the two statements is that this month's statement does not have the sentence "an additional monetary tightening can be introduced if needs be." The lack of this sentence has raised hopes that interest rates could be decreased in next meetings.

'A certain amount of improvement' in inflation

In the statement released after the meeting of the Monetary Policy Committee, the bank has explained its decision as follows:

"A certain amount of improvement has been observed in inflation outlook based on domestic demand developments.

"Though the foreign demand has been keeping its strength, the slowdown in the economic activities has been continuing as a result of the tightening in the financial conditions.

Increase in food prices

"However, the increase in food prices and import input costs as well as expectations for high inflation figures have shown that the risks in terms of price stability are still continuing.

"Within this frame, the Central Bank has agreed to steadfastly maintain the tight stance in monetary policy until an evident improvement is achieved in inflation outlook.

"The Central Bank will continue to use all tools that are at its disposal to maintain price stability.

"The developments in elements influencing the inflation outlook will be followed closely and the monetary stance will be determined in accordance with the targeted inflation rates." (HK/SD)