DECISION OF THE MONETARY POLICY COMMITTEE
Central bank: tcmb | Type: decision | Date: 2006-03-24

No: 2006 - 13
March 24, 2006
DECISION OF THE MONETARY POLICY COMMITTEE
Meeting Date: 23 March 2006
Committee Members Who Participated in the Meeting
Erdem Ba şçı (Chairman), Şükrü Binay, Rifat Günay, Fatih Özatay, Güven Sak,
Durmu ş Yılmaz
-------------------------------------------------------------------------------------------------------
The Monetary Policy Committee has decided to keep the short-term interest
rates (policy rates) unchanged at the CBRT Interbank Money Market and the Istanbul
Stock Exchange Repo-Reverse Repo Market:
a) Overnight Interest Rates: The CBRT borrowing interest rate is 13.50
percent, and the CBRT lending interest rate is 16.50 percent,
b) Late Liquidity Window Interest Rates: Within the framework of the Late
Liquidity Window Facility, the CBRT overnight borrowing interest rat e applicable
between 16:00 – 16:30 hours at Interbank Money Market is 9.50 percent. Lending
interest rate is 19.50 percent,
c) The interest rates applicable to overnight and one-week maturity borrowing
facilities provided for primary dealer banks via repo transactions w ithin the
framework of open market transactions are 15.50 percent.
The Monetary Policy Committee has concluded that the recent developme nts,
while supporting short-term inflation forecasts, do not significantly change the
medium-term outlook elaborated in the Inflation Report. It is expected that i) the cut
in Value Added Tax rates in the textile, ready-wear and leather sectors, ii) the ongoing
productivity increases in the manufacturing industry, iii) the fact that the secondary
effects of oil price increases are continuing to remain limite d, will favorably affect
inflation in the short-term. In the light of these developments, it is estimated that the
downward trend in annual inflation will resume starting from March, a nd end-year
inflation will come closer to of 5 percent target rate. However, the cautious approach
in monetary policy should be maintained in view of a possible increase in perceptions
of uncertainty over monetary policy, the continuation of price rigiditie s in the service
sector, the reduction of the contribution of demand conditions to inflation, and t he
persisting high volatility in the costs of raw materials. Moreove r, the international
liquidity conditions are being closely monitored.
In the light of currently available information, policy rates are less likely to
increase, rather than remain stable or decrease in the medium-te rm. In the near-term,
however, the likelihood of policy rates to remain stable has been decli ned since the
last meeting. This policy perspective will ensure that inflation is in line with the target
path around mid-2007. On the other hand, it should be emphasized that any new data
and information associated with the inflation outlook will lead the Monet ary Policy
Committee to potentially revise its future stance.
A broader summary of the assessments of the Monetary Policy Com mittee
will be published within five working days.