UPDATE 1-Turkey takes steps to restrain demand without rate hikes-Simsek

Tue Jan 7, 2014 5:56am EST

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ISTANBUL, Jan 7 (Reuters) - Finance Minister Mehmet Simsek said on Tuesday Turkey is taking measures to keep domestic demand at reasonable levels without resorting to interest rate hikes, supporting the central bank's current monetary policy stance.

"The central bank, banking watchdog, finance ministry and treasury got together, we limited loan growth with capital adequacy ratios and macro prudential measures, without resorting to rate hikes," said Simsek speaking in an interview broadcast live by CNN Turk.

"So Turkey has proven success in reducing loan volumes to reasonable levels without raising interest rates."

The Turkish lira has been under intense pressure since the U.S. Federal Reserve announced it will begin winding down, or tapering, its $85 billion-a-month money-printing programme and a high-level corruption probe has added to that pressure.

Emerging markets are seeing foreign investment pull back as a result and Turkey is among the most vulnerable with its huge current account deficit and its reliance on external financing.

Turkey's banking watchdog said in November it will seek to curb consumers' use of credit cards to pay for goods by monthly installments in the hope of stemming the flood of money spent on imported goods, aiming to reduce the country's crippling current account deficit. (Reporting by Seda Sezer)

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