Central Bank Lowers Policy Rate By 0.50 Points To 7.75 Percent

- The Monetary Policy Committee of Central Bank of Turkey, lowered the policy rate by 0.50 points tı 7.75 percent, according to the statement released by the Bank on Tuesday.

Tha Central Bank kept all other short term rates, including the marginal funding rate at 11.25 percent, the interest rate on borrowing facilities provided for primary dealers via repo transactions at 10.75 percent, and borrowing rate at 7.5 percent. Late liquidity window lending rate has also been kept at 12.75 percent.

"Loan growth continues at reasonable levels in response to the tight monetary policy stance and macroprudential measures" said in the statement, adding that, the favorable developments in the terms of trade and the moderate course of consumer loans would contribute to the improvement in the current account balance.

External demand remained weak, while domestic demand contributed to growth moderately, according to the statement, where the Committee assessed that the implementation of the announced structural reforms would contribute to the potential growth significantly.

The tight monetary policy stance and macroprudential measures continued to have favorable impact on inflation, especially inflation excluding energy and food indicators, and inflation expectations, the Bank said in the statement. "Moreover, declining commodity prices, in particular oil prices, contribute to disinflation. In light of these positive developments, the Committee has decided on a measured cut in the one week repo rate."

Under the current monetary policy stance, the Committee anticipated that inflation would decline to levels close to the target by mid-2015, said in the statement, and went on as follows:

"Yet, a more persistent reduction in inflation necessitates a cautious approach in monetary policy. In this context, future monetary policy decisions will be conditional on the improvements in the inflation outlook. Inflation expectations, pricing behavior and other factors that affect inflation will be closely monitored and the tight monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook."