Turkey's inflation figures cause interest rates to increase

Thursday, 08 June 2006 16:40:10 (GMT+3)   |  
       

Following the May inflation figures, Turkey's Central Bank (TCMB) raised short-term interest rates by 1.75 points. Accordingly, the overnight borrowing rates was increased from 13.25 percent to 15 percent and the borrowing rate from 16.25 percent to 18 percent. TCMB said “Monetary Policy Committee required reviewing interests in an effort to prevent permanent effect of the short-term developments on medium-term expectancies and pricing”. Following the decision of Monetary Policy Committee, with the overnight borrowing rates, which were raised to 15 percent, borrowing rate returned to its level in April 11, 2005. TCMB President Durmus Yilmaz indicated that their priority target is inflation, adding that the price stability is never laid down for any priority and target. Some messages given by Mr. Yilmaz regarding economy are as follows: • Price stability is not provided yet • The effect of exchange rate will also continue in June • Inflation will increase temporarily in the coming months • To achieve 2006 target seems a little bit hard, but 2007 and 2008 targets can be achieved • Private sector must be very careful about the open position • There is no any deterioration in macro-economic basics There will be a temporarily upward trend in inflation. In medium-term, downward trend is expected to continue with the ongoing monetary and fiscal discipline.

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