Turkish Central Bank Holds Benchmark Rate at 5.75%

The Central Bank of the Republic of Turkey maintained its benchmark 1-week repo rate unchanged at 5.75%.  The Bank said: "The Committee has agreed that the measures taken at the interim meeting on August 4, 2011 have contained the downside risks for the economy for the time being, and thus decided to keep the policy instruments unchanged at this meeting.  However, given the uncertainties regarding the global economy, it is important to monitor all developments closely, and to deliver the required policy response in a timely manner.  The Committee has also reiterated that all policy instruments may be eased should global economic problems further intensify and the  slowdown in domestic economic activity becomes more pronounced."

Earlier this month the Turkish central bank held an emergency meeting where it cut the benchmark interest rate 50 basis points to 5.75%; prior to that, the bank had last cut its benchmark interest rate by 25 basis points to 6.25% in January this year.  The Turkish central bank also adjusted required reserves in late July and reduced FX lending rates earlier this month.  Turkey reported annual consumer price inflation of 6.3% in July, compared to 6.2% in June, 7.2% in May, and still up from 4.26% in April, and above the Bank's full year inflation target of 5.5%.  The Turkish Lira has weakened by about 15% against the USD so far this year, and is trading around 1.78 against the US dollar.

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