Central Bank of Turkey's Monetary Policy Committee (MPC) has decided to keep the policy rate unchanged at 7.50 percent, despite expected increase by 0.50.Following the decision of Central Bank to keep policy rate unchanged, dollar soared to 2.9455 liras and euro to 3.2252 liras.
After the decision, euro that has reached 3.2252 liras slightly declined then remained over 3.22 liras. Istanbul Stock Exchange Main Index declined by 1.12 percent to 72,508 points.
The Committee also kept other short term rates unchanged, marginal funding rate at 10.75 percent and borrowing rate at 7.25 percent, said in the statement released by the Central Bank on Dec. 22.
The Central Bank statement underlined the uncertainty in global markets and stated that considering its impacts on inflation expectation and the volatility in energy and unprocessed food prices, tight liquidity stance was decided to be maintained "as long as deemed necessary".
“The decline in volatility observed after the start of the global policy normalization persist” it added.
The statement of the Monetary Policy Committee commented as follows:
"Annual loan growth continues at reasonable rates in response to the tight monetary policy stance and macroprudential measures. The favorable developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance."
The composition of growth has "shifted towards net exports with the support of rising demand from the European Union economies" the statement added.
"The Committee assesses that the implementation of the announced structural reforms would contribute to the potential growth significantly" stressed the Central Bank Committee.
The statement said that energy price developments affect inflation "favorably", while "cumulative exchange rate movements delay the improvement in the core indicators".