THE DECISION OF THE MONETARY POLICY COMMITTEE
Central bank: tcmb | Type: decision | Date: 2006-08-24

No: 2006-41
August 24, 2006
THE DECISION OF THE MONETARY POLICY COMMITTEE
Meeting Date: 24 August 2006
Committee Members Participated in the Meeting
Durmu ş Yılmaz (Governor), Erdem Ba şçı, Burhan Göklemez, Güven Sak, M. İbrahim
Turhan, Mehmet Yörüko ğlu.
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The Monetary Policy Committee (Committee) has decided to keep short-term
interest rates (policy rates) unchanged in the Inter-bank Money Market and the
Istanbul Stock Exchange Repo-Reverse Repo Market as follows:
a) Overnight Interest Rates: The overnight borrowing interest rate is 17.50
percent, and the overnight lending interest rate is 22.50 percent.
b) Late Liquidity Window Interest Rates: Within the framework of the Late
Liquidity Window Facility, the overnight borrowing interest rate vali d between 4:00
p.m. – 4:30 p.m. in the Inter-bank Money Market is 13.50 percent, while the lending
interest rate is 25.50 percent.
c) The interest rate on overnight and one-week maturity borrowing fac ilities
provided for primary dealer banks via repo transactions within the fram ework of open
market transactions is 21.50 percent.
The recently available data have confirmed our earlier conjecture that the
economic activity would slow down, albeit not as significantly, in the second half of
2006 due to sluggish domestic demand. The measures taken in June by the Cent ral
Bank and its determination to attain medium targets have eased the medium-term
inflationary pressures. In August, not only the pessimistic sentiment s about inflation
came to an end, but also the expectations started to show a slight i mprovement.
Moreover, there has been a slight improvement international liquidity c onditions. In
light of these developments, the Monetary Policy Committee perceive s that the
medium-term inflation outlook has become slightly more favorable. Howeve r, the
factors such as the continuation of risks arising from oil and other c ommodity prices,
the mismatch between the expectations and the medium-term target s, and the
uncertainties in the international liquidity conditions necessitate t he monetary policy
to remain cautious. In addition, it should be emphasized that the implement ation of
the incomes policy in line with the program targets is crucial for attaining the 2007
inflation target.
The Committee assesses that maintaining the cautious stance for a while is
necessary for the inflation rate to converge to the 2007 year-end tar gets. As stated in
earlier announcements and reports, the Central Bank will not hesitate to implement
further tightening if the incoming data suggest an unfavorable medium- term inflation
It should be emphasized that any new data or information on inflation outlook
will potentially lead the Monetary Policy Committee to revise its future stance.
A brief summary of the assessments of the Monetary Policy Comm ittee will
be released within five working days.