In line with market expectations, the Central Bank has increased its policy rate, the one-week repo auction rate, by 500 bps from 30 percent to 35 percent.
Since June, the bank has hiked the policy rate by 2,650 bps.
“The committee decided to continue the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior,” the bank said on Oct. 26, in a statement released after the Monetary Policy Committee (MPC).
The policy rate will be determined in a way that will create monetary and financial conditions necessary to ensure a decline in the underlying trend of inflation and to reach the 5 percent inflation target in the medium term, the bank reiterated.
“Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in inflation outlook is achieved,” the statement said.
The pass-through from tax regulations and cost pressures stemming from wages and exchange rates, which have been recently impactful, has been largely completed, according to the bank.
But it cautioned that the strong course of domestic demand, the stickiness of services inflation, and the deterioration in inflation expectations continue to put upward pressure on inflation.
The underlying trend in monthly inflation is on course to decline, the bank stressed.
The month-on-month increase in consumers prices slowed from 9.1 percent in August to 4.75 percent in September, according to the latest data from the Turkish Statistical Institute (TÜİK).
Through the monetary tightening process, the committee is determined to establish the disinflation course in 2024, the statement added.
Foreign direct investment, stable course of external financing conditions, continued increase in foreign exchange reserves, and the increase in domestic and foreign demand for Turkish Lira denominated assets will significantly contribute to price stability, the bank furthered.
Monetary transmission mechanism will be further strengthened by taking additional steps to increase the share of lira deposits, it said.
“In addition to the increase in the policy rate, the Committee will continue to make decisions on quantitative tightening and selective credit tightening to support the monetary policy stance.”
The Central Bank will hold two more rate-setting meetings this year the next one on Nov. 23 and the last one on Dec. 21.
Source: hurriyetdailynews