THE DECISION OF THE MONETARY POLICY COMMITTEE ON
Central bank: tcmb | Type: decision | Date: 2006-07-20

No: 2006-38
July 20, 2006
THE DECISION OF THE MONETARY POLICY COMMITTEE ON
INTEREST RATES
Meeting Date: 20 July 2006
Committee Members Participated in the Meeting
Durmu ş Yılmaz (Governor), Erdem Ba şçı, Burhan Göklemez, Güven Sak, M. İbrahim
Turhan, Mehmet Yörüko ğlu.
_____________________________________________________________________
The Monetary Policy Committee (Committee) has decided to increase short-
term interest rates (policy rates) 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 increased
to 17.50 percent from 17.25 percent, and the overnight lending interest rate is
increased to 22.50 percent from 22.25 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 increased to 13.50 percent from
13.25 percent while the lending interest rate is increased to 25.50 percent from 25.25
c) The interest rates on overnight and one-week maturity borrowing fa cilities
provided for primary dealer banks via repo transactions within the fram ework of open
market transactions are increased to 21.50 percent from 21.25 percent.
The Committee perceives that the recent rise in inflation will continue in July
due to the lagged exchange rate pass-through. The measures taken in J une by the
Central Bank is expected to ease the pressures on inflation in the forthcoming period.
However, there is still need to remain cautious for inflation becaus e oil and other
commodity prices are still increasing and the expectations are not yet in line with the
medium-term targets. Taken all these factors into account, the Com mittee decided to
move toward a measured tightening of monetary policy in order to achie ve the 2007
year-end inflation target.
In light of the existing risks, the Committee considers that the cautious stance
is more likely to continue for some time. Under a cautious stance, the downward trend
in inflation is expected to be significant in the second quarter of 2007. In the
forthcoming period, the developments in the international liquidity conditions, the
course of domestic demand, pricing behavior and the public sector income poli cy will
be monitored closely.
It should be emphasized that any new data or information associated wi th the
inflation outlook will potentially lead the Monetary Policy Committe e to revise its
future stance.
A brief summary of the assessments of the Monetary Policy Comm ittee will
be released within five working days. Following that, the Inflation Re port assessing
the reflections of recent economic developments on the medium-term inf lation
outlook will be released on 28 July 2006.