Central Bank maintains rates

ISTANBUL - Hürriyet Daily News

Central Bank Governor Erdem Başçı is seen here. The Central Bank kept the policy rate unchanged at 5.75 pct. MPC also hinted at gradual narrowing of the corridor.AA photo

The Central Bank of Turkey did not adjust its interest rates yesterday, keeping the policy rate and both ends of the interest rate unchanged, while the Monetary Policy Committee (MPC) hinted at narrowing the corridor gradually in the coming period.

The policy rate was unchanged at 5.75 percent. The bank’s overnight borrowing and lending rates remained also unchanged at 5 percent and 11.5 percent, respectively, making up both ends of the interest rate corridor. The bank increased the Turkish Lira reserve ratio that banks can keep in foreign exchange from 55 percent to 60 percent.

“The Central Bank this time used the phrase ‘flexibility in the monetary policy in both directions’ instead of ‘flexibility in monetary policy.’ We think that the Central Bank wanted to clarify that it is still cautious because of global uncertainties,” Özgür Altuğ, the chief economist at BGC Partners said yesterday in a research note sent to customers. “We think that the narrowing could start after the September inflation data becomes available in October.”

“I am sure that the Central Bank will interpret the messages from the business world in the best way and continue its growth-based proactive policies. I want to state that the time has arrived to start fast economic growth for Turkey again,” Economy Minister Zafer Çağlayan said yesterday at a press conference.

Çağlayan said in July he expected the Central Bank to lower the upper end of the interest rate corridor before last month’s decision was disclosed.