The Central Bank lowered the policy rate by 1 percentage point to 15%. Thus, in the last three Monetary Policy Committee meetings, a total of 4 percentage points of interest rate cuts were realized.
The Central Bank, which reduced the policy rate by 3 points in September and October, reduced it by 1 point yesterday. The Monetary Policy Committee (MPC), chaired by Central Bank President Sahap Kavcioglu, reduced the policy rate, the one-week repo auction rate, from 16% to 15% . Thus, the policy rate, which was reduced by 4 points in the last three meetings, dropped to the level of 19 November 2020.
THE DOLLAR FLACTUATED
The Central Bank’s interest rate decision caused sharp fluctuations in the foreign exchange market yesterday. The dollar, which closed Wednesday at ₺10.62, rose to ₺10.97 at the opening yesterday morning. The dollar, which fell to ₺10.45 before the Central Bank’s decision, rose to ₺10.98 after the interest rate cut was announced. The exchange rate later rose above ₺11. The fluctuation of the dollar during the day reached over 7%.
LOANS ARE BEING WATCHED
In the statement made after the MPC, it was stated that the recent rise in inflation was due to supply-side factors such as increases in import prices, primarily energy, as well as disruptions in supply processes, increases in administered/directed prices, and demand developments. It was emphasized that the positive effects of the update in the monetary policy stance on commercial loans are starting to be seen, and developments in retail loans are followed closely.
DISCOUNT SIGNAL IN DECEMBER
Noting that it was decided to reduce the policy rate by 100 basis points after evaluating the analyzes of the MPC on the decomposition of demand factors that can be affected by monetary policy, core inflation developments and the effects of supply shocks, “The Board expects the temporary effects of supply-side factors outside the influence of monetary policy on price increases to continue throughout the first half of 2022. The Board will consider completing the use of the limited space implied by these effects in December.”
ASSET PURCHASE CONTINUES
Despite the increase in vaccination rates, it was stated that the new variants in the epidemic kept the downside risks on the global economic activity alive. Stating that the effects of high global inflation on the markets are closely monitored, the central banks of developed countries consider that the rise in inflation may take longer than expected due to rising energy prices and supply-demand mismatch. In this context, central banks of developed countries continue their asset purchase programs.”
THE LARGEST FOREIGN INFLOW OF 1 YEAR
Foreign inflow to Borsa Istanbul continues at full speed, which has become the focus of attention of foreigners once again, with BBVA’s announcement that it will make a voluntary call of ₺25.7 billion at Garanti Bank this week. According to the Central Bank data, the highest foreign inflow of the last 1 year was realized with $479.6 million in the stock market in the week between 5-12 November. In the same week, an inflow of $109.8 million was realized in bonds and bills. The 1-week total foreign inflow was $589.4 million. In the two weeks between October 28 and November 12, $902.5 million of foreign inflows were realized in the stock and bond-bill market.
CURRENT BALANCE IS IMPROVING
Emphasizing that the domestic economic activity was strong with the effect of foreign demand, it was noted that the spread of vaccination throughout the society allowed the services, tourism and related sectors that were adversely affected by the epidemic to revive and economic activity to be continued with a more balanced composition. It was stated that while the demand for durable goods slowed down, the recovery in non-durable goods continued, the improvement in the current account balance is expected to continue in the rest of the year due to the strong upward trend in exports, and the continuation of this trend by getting stronger is important for the price stability target.
Source: Sabah / Translated by Irem Yildiz