The most unexciting monetary policy meeting
At its most recent meeting, the Central Bank of Turkey’s Monetary Policy Committee (PPK) left interest rates unchanged as per market expectations. It is useful to refresh our memories of the recent history of unchanged interest rates in the country.
Since Feb. 25, 2015, the overnight borrowing rate has been implemented at 7.25%, while the overnight lending rate has remained at 9.25% since Jan. 25, 2017 and the one-week repo rate has stayed at 8% since Nov. 25, 2016. In practical terms, these rates make no odds anymore. It’s well known that the central bank mainly funds the market through the late liquidity window facility. The rate for the late liquidity window facility – also known as a by-pass – has been 12.25% since April 20.
The funding cost as a result of the central bank funding the market – also known as the average funding cost – has been flitting between 11.93% and 11.98% for the last two months. It wouldn’t be wrong to say that the average funding cost is roughly 12% – and that confirms the fact that the central bank funds the market mainly through the late liquidity window facility. Though it’s no secret.
We have witnessed the PPK reverse some of its previous sentences and play with words while making statements after PPK meetings in an attempt to make a difference. But this time the statement was almost exactly the same as the statement made on June 15. The only difference between the two statements was a slight change in one sentence. “With the support of incentives and measures, economic activity is expected to maintain its strength,” became “With the support of incentives and measures, economic activity is expected to continue gaining strength.” The rest of the text remained exactly the same.