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ANKARA, May 28 (Reuters) - Turkey’s Central Bank said on Monday that it decided to complete the process of simplifying monetary policy and that the one-week repo rate would be the policy rate, at a level equal to the current funding rate, or 16.5 percent.
For years the bank has relied on a complex system of multiple rates, which economists said made monetary policy less predictable. It has been funding through its late liquidity window rate, which it raised by 3 percentage points to 16.5 percent last week to shore up a tumbling lira.
In a statement, the central bank (CBRT) said the new operational framework will take effect on June 1. The overnight borrowing and lending rates will be determined at 150 basis points below and above the one-week repo rate, it added.
“The CBRT has decided to complete the simplification process regarding the operational framework of monetary policy,” the bank said in a statement, adding that technical details would be announced later.
The lira firmed to 4.6070 against the dollar after the announcement from a close of 4.7052 on Friday. It was still 18 percent weaker so far this year.
The currency had gained in early trade after investors cited weekend comments by Central Bank Governor Murat Cetinkaya signalling an imminent move to simplify policy. (Reporting by Nevzat Devranoglu; Writing by Daren Butler; Editing by Ezgi Erkoyun)