Bloomberg News

Turkey to Tighten Monetary Policy on Energy Price Increases

April 03, 2012

Turkey’s central bank plans to tighten monetary policy as a result of increases in energy prices, according to Mehmet Yorukoglu and other deputy governors of the bank.

The central bank will probably increase the rate it charges lenders on ordinary days, when it sets borrowing costs at the bottom end of its interest corridor, and may also charge more on the extraordinary days when the price is set toward the top of the range, according to comments made by Yorukoglu and his peers at a meeting with economists in Ankara today.

’’The central bank’s latest steps such as squeezing liquidity was a step towards this end,’’ Ercan Erguzel, economist at Denizbank AS (DENIZ), said in an e-mailed response to questions. “The rates were around 7.5 percent on normal days and the central bank is signalling that the rates can be more than that.”

Central bank governor Erdem Basci is offering less funding to banks at the benchmark 5.75 percent rate and more at rates as high as 11 percent in regular auctions to help stem loan growth, inflation and the second-biggest current account deficit globally after the U.S. Turkey imports more than 98 percent of the energy it consumes and the price of Brent crude climbed to $126.7 per barrel today from $108.7 at the end of last year. Inflation was 10.4 percent in March, near a three-year high, the statistics agency said today.

Yields on two-year bonds fell 4 basis points, or 0.04 percentage point, to 9.34 percent at 5:47 p.m. The lira rose 0.1 percent to 1.7767 per dollar.

To contact the reporters on this story: Ali Berat Meric in Ankara at americ@bloomberg.net; Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

To contact the editors responsible for this story: Ben Holland at bholland1@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net


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