CBRT Announced Its Interest Rate Decision

The CBRT announced its interest rate decision. The Central Bank of the Republic of Turkey (CBRT) lowered the policy rate to 18 percent.

The general expectation in the market was to keep the interest rate constant at 19 percent. While it was stated in the CBRT's decision text that developments regarding core inflation were evaluated, the phrase "decisive tight stance" was also removed from the text. It was observed that the text of the decision did not include statements that made a firm stand commitment. In the text of the decision, the recent rise in inflation; It was stated that supply-side factors such as increases in food and import prices and disruptions in supply processes, increases in administered/directed prices and demand developments due to opening were effective. The CBRT stated in the text that these effects are considered to be caused by accidental factors. On the other hand, emphasizing that the slowing effects of strong monetary tightening on loans and domestic demand continued, the CBRT underlined that the tightness of the monetary stance began to have a contractionary effect on commercial loans beyond the anticipated. In addition, it was reminded that the macroprudential policy framework was strengthened in order for retail loans to return to a moderate course. In the text of the decision, the statements that the interest rate will be determined on inflation and that a determined tight stance will be applied were not used this time. It was stated that the CBRT will continue to use all the tools at its disposal with determination until strong indicators pointing to a permanent decline in inflation occur and the medium-term 5 percent target is achieved in line with its main objective of price stability.