Policy rate, also known as 1-week repo rate, down to 16% from 18%, well above market forecast
The Turkish Central Bank on Thursday lowered its one-week repo rate by 200 basis points, well above market expectation.
The policy rate – also known as the one-week repo rate decreased to 16% from 18%, the bank said in a statement following its 10th Monetary Policy Committee (MPC) meeting this year.
Last week, among 26 economists surveyed by Anadolu Agency, six expected no change, while eight predicted the rate to fall by 50 basis points, one by 75 basis points, and 11 by 100 basis points, with the median being 50 basis points.
The bank stressed that the recent rise in inflation rates is caused by supply side factors such as higher food and import prices – especially in energy disruptions in supply chains, an increase in administered prices, and recovering demand.
It is assessed that these effects are due to transitory factors, the bank said.
The monetary tightening had a decelerating impact on credit and domestic demand, it said, adding the tight monetary stance has a higher-than-envisaged contractionary effect on commercial loans.
In addition, strengthened macroprudential policy framework has started to curb personal loan growth, the bank stressed.
After the committee evaluated the analyses regarding decomposing the impact of demand factors that can be affected by monetary policy, core inflation developments and supply shocks, it decided a cut in interest rate.
“Nevertheless, the Committee assessed that, till the end of the year, supply-side transitory factors leave limited room for the downward adjustment to the policy rate,” it noted.
In its last meeting in September, the Central Bank also reduced one-week repo rate by 100 basis points to 18% after holding it unchanged at 19% in its previous five consecutive meetings.
Turkey’s annual inflation rate climbed to 19.58% in September compared to the previous month, according to the latest data from the Turkish Statistical Institute. The figure was the highest since March 2019.