Breaking News: CBRT Announced Its Interest Rate Decision!

According to the breaking news, the CBRT announced its interest rate decision. The Central Bank of the Republic of Turkey (CBRT) raised the interest rate by 200 basis points.

The Central Bank of the Republic of Turkey (CBRT) reported that in the Monetary Policy Committee (MPC), chaired by Central Bank Governor Naci Ağbal, it decided to raise the policy rate from 17 percent to 19 percent. It was stated that the global growth outlook and international commodity prices increased due to the positive developments experienced in the vaccination process with the expansionary monetary and fiscal policies, while the rising global inflation expectations caused uncertainties regarding the monetary policies of the developed countries and fluctuations in the global financial markets. The statement made by the CBRT included the following: "Economic activity is following a strong course. With the easing of the constraints due to the epidemic, economic activity is expected to increase in services and related sectors. However, the risks on economic activity remain important depending on the possible developments regarding the course of the epidemic. Meanwhile, the increase in import prices continues to affect the current account balance negatively, while credit growth, which has slowed down due to the tightening in financial conditions, has displayed an upward trend recently. Domestic demand conditions, cumulative cost effects, particularly the exchange rate, the rise in international food and other commodity prices, and high levels of inflation expectations continue to adversely affect pricing behavior and inflation outlook. On the other hand, wage and administered price adjustments due to supply constraints in some sectors maintain their importance on the medium-term inflation outlook. Although the expectation that the slowing effects of the monetary tightening on loans and domestic demand will become more evident, the recent upward trend in loan growth and the increase in import costs delay the gradual improvement in demand and cost factors."  

Additional Monetary Tightening Will Be Made

The statement also included the Monetary Policy Committee, which decided to introduce a strong additional front-loading monetary tightening, taking into account the upside risks that these developments pose on inflation expectations, pricing behavior and the medium-term inflation outlook. The statement noted the following on the subject: "The balance between monetary policy rate and actual/expected inflation will be resolutely maintained in a way that preserves the strong disinflationary effect, up to the permanent price stability and the target of 5 percent. In addition to maintaining the tight monetary policy stance in this way, it will permanently establish price stability and the decrease in country risk premiums, It has been evaluated that the introduction of currency substitution will affect macroeconomic and financial stability positively through the increase in foreign exchange reserves and permanent decline in financing costs. The CBRT adopts an analysis framework based on all factors affecting inflation and the interaction of these factors with a medium-term perspective in its decision-making processes. It should be emphasized that new data and news may cause the Board to change its future policy stance." It was also informed that the Monetary Policy Committee meeting summary will be published within 5 business days.