The Central Bank of the Republic of Turkiye (CBRT) Monetary Policy Committee (MPC) increased the one-week repo auction rate, which is the policy rate, by 750 basis points to 25%.
In the announcement made by the CBRT regarding interest rates, it was reported that the Board meeting under the chairmanship of Central Bank Governor Hafize Gaye Erkan decided to increase the policy rate to 25%.
In the announcement, it was stated that the Board decided to continue the monetary tightening process in order to establish disinflation as soon as possible, to anchor inflation expectations and to control the deterioration in pricing behavior.
In the announcement, it was noted that the indicators for the near-term point to the continuation of the rise in the underlying trend of inflation.
“The strong course of domestic demand, cost pressures stemming from wages and exchange rates, rigidity in services inflation and tax regulations are determining factors in this development. In addition to these factors, the deterioration in inflation expectations and pricing behavior more than anticipated due to the rise in fuel prices indicates that inflation will remain close to the upper limit of the forecast range in the Inflation Report (Report) at the end of the year. However, the Board predicts that disinflation will be established in 2024 in line with the Report, with the effect of monetary tightening steps.”
In the announcement, it was noted that foreign direct investments, the improvement in external financing conditions, the ongoing increase in reserves and the support of tourism revenues to the current account will contribute strongly to price stability.
In the announcement, which stated that the policy rate will be determined in a way that will reduce the underlying trend of inflation and provide the monetary and financial conditions that will bring inflation to the 5% target in the medium term, “Monetary tightening will be gradually strengthened as and when necessary until a significant improvement is achieved in the inflation outlook.”
“The Board will continue to take selective credit and quantitative tightening decisions to support the monetary tightening process.”
In the announcement, it was stated that the Board has simplified the existing micro- and macroprudential framework in a way that will increase the functionality of market mechanisms and strengthen macro-financial stability, and that the simplification process will continue gradually, taking into account the impact analyses.
In this context, it was stated in the announcement that the regulations to increase the share of Turkish lira deposits will strengthen the monetary transmission mechanism, and it was noted that the Board will continue to take selective credit and quantitative tightening decisions that will support the monetary tightening process as well as increasing interest rates.
In the announcement, it was stated that inflation and the underlying trend of inflation will be closely monitored and the Board will resolutely continue to use all the tools at its disposal in line with the main objective of price stability.
In the announcement stating that the Board will continue to take its decisions in a predictable, data-oriented and transparent framework, it was announced that the Monetary Policy Committee Meeting Summary will be published within five to five working days.
Source: AA / Prepared by Irem Yildiz