UPDATE 1-Turkish central bank says may begin simplifying rate policy this month

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ISTANBUL, Jan 7 (Reuters) - Turkey’s central bank may begin steps to “simplify” monetary policy at its meeting this month if an easing of market volatility endures, the text of a presentation by Governor Erdem Basci said on Thursday.

The bank has previously said its policy simplification will involve narrowing its interest rate corridor, between its overnight borrowing and lending rates, and making it more symmetric around the one-week repo rate.

Investors have long urged the bank to move towards using a single interest rate and markets were disappointed by its failure at its last meeting on Dec. 22 to simplify policy or to hike rates. The bank’s inaction reignited concerns about political threats to its independence and renewed pressure on the lira currency.

Basci’s presentation to parliament’s planning and budget commission, dated Jan. 7, was released as the lira edged back towards record lows to the dollar against a backdrop of global market losses after China accelerated yuan depreciation.

“If the decline in volatility witnessed with the start of global monetary policy normalisation is lasting, monetary policy simplification steps could start from the next meeting,” the presentation said.

By global “normalisation”, Basci was referring to the U.S. Federal Reserve’s decision to raise interest rates last month for the first time in nine years.

The next meeting of Turkey’s monetary policy committee is scheduled for Jan. 19.

The central bank has long faced political pressure to keep monetary policy loose, with President Tayyip Erdogan repeatedly calling for cuts in borrowing costs and even equating high interest rates with treason. (Reporting by Behiye Selin Taner; Writing by Daren Butler; Editing by Nick Tattersall and Gareth Jones)