PodcastTurkish Central Bank keeps interest rates steady
The Turkish Central Bank on Aug. 20 kept its one-week repo rate – also known as the policy rate – constant at 8.25 percent, holding it unchanged for the third straight month. "The gradual normalization of pandemic-specific financial measures and recent tightening steps taken in liquidity management are judged to support macrofinancial stability," said the bank statement.
Anadolu Agency
Turkish Lira barely responds to President Erdoğan's 'good news'The Turkish Central Bank on Aug. 20 kept its one-week repo rate – also known as the policy rate – constant at 8.25 percent, holding it unchanged for the third straight month.
The decision was announced in a statement following the bank's eighth Monetary Policy Committee (MCP) meeting of 2020.
"The gradual normalization of pandemic-specific financial measures and recent tightening steps taken in liquidity management are judged to support macrofinancial stability," said the bank statement.
Saying that uncertainties over domestic and external demand conditions remain significant, the bank stressed that it will continue with liquidity measures.
In recent weeks the bank has taken several steps to tighten liquidity conditions to support the Turkish lira such as halving the overnight borrowing limits of lenders and cutting liquidity limits offered to primary dealers to zero.
Turkey's Central Bank halves limit on overnight interbank money loansUnderlining that the economic recovery which started in May is picking up pace, the bank said the level of the real exchange rate will support the current account balance in the coming days.
As markets had expected the bank's decision, the U.S. dollar/Turkish lira exchange rate rose above 7.34 after hovering around 7.28 just before the announcement.
Reserve requirement ratios raised
The forex regime invented by Ankara collapsesThe bank also raised the reserve requirement ratios for banks fulfilling real credit growth conditions in a bid to withdraw liquidity from the markets.
The Central Bank “decided to raise FX [foreign exchange] reserve requirement ratios for banks fulfilling real credit growth conditions by 700 basis points for precious metal deposit accounts and by 200 basis points for all other FX liabilities for all maturity brackets."
Under the move, Turkish lira reserve requirement ratios were raised 200 basis points for all deposits and participation funds liabilities with a maturity of up to six months and other liabilities with a maturity up to one year, and by 150 basis points for other liabilities with a maturity of up to three years.
The move is expected to withdraw some 17 billion Turkish liras ($2.3 billion) and $8.5 billion of FX and gold liquidity from markets, the bank said.