Published On: Fri, Jun 8th, 2018

Turkey’s Central Bank increases its policy rate by 125 basis points

Central Bank Governor says inflation will gradually decrease in Turkey

The Central Bank of Turkey surprised the market with a strong move to tighten the markets and increased its policy rate by 125 basis points. The expectation was that the interest rate would go up by 50-100 basis points, only.

The Monetary Policy Committee which convened today raised the policy rate by 125 basis points, contrary to the general expectation in the market. The weekly repo auction interest rate was raised from 16.50 to 17.75 percent. The overall view in the market was that there would be an increase of 50-100 base points, maximum.

The CBRT had taken a step towards simplification with the announcement it made on 28 May following its decision to increase the late liquidity window (GLP) lending interest rate by 300 basis points on 23 May.

Moreover, with the completion of the simplification process related to the monetary policy operational framework, the CBRT announced that the repo auction interest rate of one week from 1 June will be the policy interest rate of the Central Bank, and policy interest was reduced to 16.50 percent.

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