Central Bank of the Republic of Turkey Announces Its Interest Rate Decision

The Central Bank of the Republic of Turkey (CBRT) announced that it has decided to keep the policy rate constant at 14 percent.

The Central Bank Announced Its Interest Rate Decision. Despite the increasing inflation, the CBRT decided to cut interest rates one after the other, and took a decision in line with market expectations at its last meeting. The Central Bank announced that the policy rate was left unchanged at 14%. In the resolution text published after the meeting, it was stated that the review process of the policy framework continues. In addition, it was stated that the collateral and liquidity policy steps, whose evaluation processes have been completed, will continue to be used to strengthen the effectiveness of the monetary policy transmission mechanism. The CBRT noted that it will resolutely implement the strengthened macroprudential policy set, and that additional measures will be taken if necessary. The following statements were included in the text of the decision:

The Monetary Policy Committee (Committee) decided to keep the one-week repo auction rate, which is the policy rate, at 14 percent. The geopolitical risks, the effects of which continue to increase, were realized negatively in the first half of the year, causing the economic activity to weaken in the world. Global growth forecasts for the upcoming period continue to be updated downwards. Increasing uncertainties in global food security due to trade bans, high commodity prices, the persistence of supply constraints in some sectors, particularly in basic food and energy, and the high level of transportation costs lead to an increase in producer and consumer prices on an international scale. The effects of high global inflation on inflation expectations and international financial markets are closely monitored. However, central banks of developed countries emphasize that the rise in inflation may take longer than expected due to rising energy prices and supply-demand mismatch. In this framework, due to the differing economic outlook among countries, the divergence in monetary policy steps and communications of central banks of developed countries are increasing. It is observed that efforts to find solutions with new supportive practices and tools developed by central banks for the increasing uncertainties in financial markets have increased. Capacity utilization levels and other leading indicators point out that the strong growth at the beginning of the year continued in the second quarter with the positive effect of foreign demand. While the share of sustainable components in the composition of growth is increasing, the risks arising from energy prices continue in addition to the tourism-related improvements in the current account balance. It is important for price stability that the current account balance becomes permanent at sustainable levels. The growth rate of the loans and the meeting of the financial resources accessed with the economic activity in accordance with its purpose are closely monitored. The Board will resolutely implement the macroprudential policy set it has strengthened and, if necessary, will implement additional measures. In the rise observed in inflation; Energy cost increases caused by geopolitical developments, temporary effects of pricing formations that are far from economic fundamentals, strong negative supply shocks caused by increases in global energy, food and agricultural commodity prices continue to be influential. The Board foresees that the disinflationary process will begin with the re-establishment of the global peace environment and the elimination of base effects in inflation, together with the steps taken and determinedly implemented to strengthen sustainable price stability and financial stability. In this framework, the Board decided to keep the policy rate constant. In order to institutionalize price stability in a sustainable way, the CBRT continues to review a comprehensive policy framework that encourages permanent and strengthened liraization in all policy instruments. Collateral and liquidity policy steps, whose evaluation processes have been completed, will continue to be used to strengthen the effectiveness of the monetary policy transmission mechanism. In line with the main objective of price stability, the CBRT will resolutely continue to use all the tools at its disposal within the framework of the liraization strategy, until strong indicators pointing to a permanent decline in inflation emerge and the medium-term 5 percent target is achieved. The stability to be achieved in the general level of prices will positively affect macroeconomic stability and financial stability through the decrease in country risk premiums, the continuation of reverse currency substitution and the upward trend in foreign exchange reserves, and the permanent decline in financing costs. Thus, a suitable ground will be created for the continuation of investment, production and employment growth in a healthy and sustainable way. The Board will continue to take its decisions in a transparent, predictable and data-oriented framework. The Monetary Policy Committee Meeting Summary will be published within five business days.