Turkey's Central Bank keeps interest rates steady

The Turkish Central Bank on Thursday kept its one-week repo rate – also known as the policy rate – constant at 8.25%, 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.

Underlining 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.

On Friday, Anadolu Agency’s Finance Desk survey of 22 economists forecast the bank would hold interest rates steady, with just four predicting a rise.

At the committee’s last two meetings held in June and July, the bank kept its one-week repo rate at 8.25%, following a gradual cut of 375 basis points from 12% over the preceding months.

Last year, in eight meetings, the bank cut the rate by a total of 1,200 basis points, from 24%.

After holding eight meetings last year, this year the bank boosted the number of MPC meetings to 12.