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Lira gains value after central bank simplification announcement

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The Turkish lira gained value and firmed to 4.55 against the US dollar after a central bank decision on Monday “to complete the simplification process regarding the operational framework of monetary policy.”

According to the new model, the one-week repo rate will be the policy rate and equal to the current funding rate, which is 16.5 percent. In addition, the overnight borrowing and lending rates will be 150 basis points above or below the one-week repo rate.

The central bank was previously using a model called multiple rates, which made monetary policy less predictable for investors.

“The new operational framework will take effect on 1 June 2018,” the central bank’s statement said.

This move led the Turkish lira to rebound quickly on Monday, making it the best performing emerging market currency for the day.

On May 24, the Turkish lira hit a record, falling to 4.92 against the US dollar.

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