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Turkey - Money

Central Bank stands pat in April but drops its tightening bias

The Central Bank of the Republic of Turkey (CBRT) stood pat at its latest monetary policy meeting on 25 April, leaving the one-week repo rate unchanged at 24.00% for the fifth consecutive meeting. In addition, the Bank sounded notably less hawkish regarding a rate hike in the near future.

The decision to leave the policy rate unchanged reflected a recent drop-off in inflation; in March, inflation fell to its lowest level since August last year after reaching a high of 25.2% in October 2018. However, going forward, the CBRT noted that food prices and import prices are likely to remain elevated, while inflation expectations also appear high, suggesting that inflation won’t fall dramatically in the very near-term. Muhammet Mercan, chief economist at ING, added that “inflation inertia and FX pass-through would be key for the inflation outlook in the period ahead, though the current economic backdrop—with ongoing weakness in domestic demand and base effects—will remain supportive [to the inflation outlook].”

In the CBRT’s meeting press statement, the Bank stated it would maintain its tight stance until marked improvements in inflation are displayed. However, the Bank came off as less hawkish by removing its tightening bias, changing its forward-looking guidance to note that “the monetary stance will be determined to keep inflation in line with the targeted path” instead of “factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered.”

Our panelists see the CBRT loosening its stance later this year as inflation drops off. They see the one-week repo rate ending 2019 at 19.14% and 2020 at 15.05%.

Turkey - Money Data

2013  2014  2015  2016  2017  
Money (annual variation in %)21.5  11.9  17.4  17.6  15.5  

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Turkey Money Chart


Turkey Money
Note: Annual variation of M2 in %.
Source: Central Bank.

Turkey Facts

ValueChangeDate
Bond Yield19.67-0.09 %May 13
Exchange Rate6.06-0.85 %May 13
Stock Market86,2831.41 %May 13

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