Bloomberg News

Turkish Central Bank Says Keeping Cautious Monetary Stance

July 06, 2012

Turkish central bank governor Erdem Basci said the bank is maintaining its tight and cautious stance with regard to liquidity.

Monetary policy will remain cautious and an expected downward revision in the bank’s inflation forecast for this year shouldn’t be seen as monetary easing, Basci said in a televised speech to businessmen in Turkey’s eastern city of Elazig today.

The central bank wants to see economists’ estimates for inflation in two years time declining to its target of five percent, Basci said. Inflation risks are easing and a gradual decline in core inflation is expected, he said.

Basci introduced an interest rates corridor in August where he lends at rates between 5.75 percent and 11.5 percent to control inflation and curb lending. The bank lent at an average rate of 8.42 percent yesterday, the lowest level in more than two months.

Yields on two-year benchmark bonds fell four basis points to 8.02 percent at the close of trading at 5 p.m. in Istanbul after rising as much as five basis points after Basci spoke. Yields dropped for a ninth day, the longest streak of declines in almost three years. The lira lost 0.6 percent to 1.8198 per dollar, the weakest level this month.

The inflation rate climbed to 8.9 percent in June compared with an average estimate of 9.5 percent in a survey of nine economists, data published by the statistics agency in Ankara on July 3 showed. Basci’s forecast for inflation this year is 6.5 percent.

Inflation is expected at 6.39 percent in 24 months, according to a fortnightly central bank survey published on June 21.

To contact the reporter on this story: Ali Berat Meric in Ankara at americ@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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