The Monetary Policy Committee of the Central Bank of the Republic of Turkiye increased the policy rate to 15% with an increase of 650 basis points.
The Central Bank of the Republic of Turkiye (CBRT) Monetary Policy Committee convened under the chairmanship of Central Bank Governor Hafize Gaye Erkan.
At the meeting, where the markets turned their eyes, it was decided to raise the one-week repo auction rate, which is the policy rate, to 15%.
The press release regarding the interest rate decision included the following;
The Monetary Policy Committee (Board) decided to increase the one-week repo auction rate, which is the policy rate, from 8.5% to 15%.
The Board decided to start 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.
While inflation in the global economy has decreased, it is still well above the long-term averages. For this reason, central banks all over the world take measures to reduce inflation.
In our country, recent indicators point to an increase in the underlying trend of inflation. This development was driven by the strong course of domestic demand, cost-side pressures and the rigidity of services inflation. In addition to these factors, the Committee anticipates that the deterioration in pricing behavior will have an additional negative impact on inflation.
The Board will determine the policy rate in a way that will create the monetary and financial conditions that will ensure the underlying trend of inflation to decline and reach the 5% target in the medium term. Monetary tightening will be gradually strengthened as and when necessary until a significant improvement in the inflation outlook is achieved. Indicators of inflation and the trend of inflation will be closely monitored, and the CBRT will continue to resolutely use all the tools at its disposal in line with its main objective of price stability.
The effectiveness of monetary policy will increase with the start of the monetary tightening process. However, with the aim of ensuring the continuity of price stability, the CBRT will continue to support strategic investments that will improve the current account balance.
The Board will simplify the existing micro- and macroprudential framework to increase the functionality of market mechanisms and strengthen macro financial stability. The simplification process will be gradual by performing impact analysis.
The Board will continue to take its decisions in a predictable, data-oriented and transparent framework.
The Monetary Policy Committee Meeting Summary will be published within five business days.
Source: Trthaber / Prepared by Irem Yildiz