Turkey's interest rates left unchanged

Turkey's Monetary Policy Committee has left its interest rates unchanged after a massive rate hike to defend the lira on January 28.The Monetary Policy Committee (MPC) announced its decision on short-term interest rates on Tuesday, saying it was keeping the overnight interest rates the same, the borrowing rate at 8 percent, the marginal funding rate at 12 percent and the one-week repo rate at 10 percent,The borrowing interest rate for primary dealers such as banks via repurchase transactions was recorded at 11.5 percent.Late liquidity window interest rates (between 4pm – 5pm) were also kept unchanged with the borrowing rate at 0 percent, and the lending rate at 15 percent.The Central Bank more than doubled its borrowing rate from 3.5 percent to 8 percent on January 28 and raised the lending rate from 7.75 percent to 12 percent.- 'Significant improvement'The bank said in a statement that the upside risks on the inflation outlook and the strong and frontloaded monetary tightening delivered at the January interim meeting had contained the adverse impact of such risks on medium-term inflation expectations.“Yet, inflation is expected to increase until June, partly reflecting base effects," the bank said. “The tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook."The statement also said; “Loan growth continues to slow down in response to the tight monetary policy stance, recent macro-prudential measures and weak capital flows. In line with these developments, the data regarding the first quarter of 2014 indicates some deceleration in private final domestic demand.“Meanwhile, with the help of the recovery in foreign demand, the contribution of net exports to economic growth is expected to increase.”The bank also expects that such a demand composition will support disinflation and lead to a significant improvement in the current account deficit in 2014.