The Central Bank of the Republic of Turkey kept the interest rate constant at 14%. In its statement, the CBRT predicts that the process of disinflation will begin with the restoration of the environment of global peace and the elimination of the base effects of inflation, as well as the measures taken to establish lasting price stability and a financial stability.
The Central Bank of the Republic of Turkey (CBRT) did not change the benchmark weekly repo rate in line with market expectations. According to the statement made after the CBRT Monetary Policy Committee (MPC) meeting, the weekly repo rate remained at 14.00%.
The CBRT made no changes in the first 3 meetings of this year, after cutting the interest rate by 500 basis points in the last 4 meetings last year.
In the CBRT Market Participants Survey, year-end consumer price expectations were 46.44% and 12-month consumer price expectations were 28.41%. The CBRT inflation expectation is 23.2% for the end of 2022 and 8.2% for the end of 2023.
The Turkish Statistical Institute (TÜİK) announced that consumer prices increased by 61.14% annually in February.
The next meeting of the CBRT will take place on May 26.
The following statement was made after the meeting:
“Persistent geopolitical risks are fueling downside risks to global and regional economic activity and increasing uncertainty. Uncertainties regarding global food security, high commodity prices, more evident supply constraints in some sectors , especially energy, and rising transport costs, high levels lead to higher international producer and consumer prices.The effects of high global inflation on expectations of inflation and international financial markets are closely watched.
However, central banks in developed countries consider that the rise in inflation could take longer than expected due to rising energy prices and the mismatch between supply and demand. In this context, although there is a divergence in the monetary policy communications of the central banks of the developed countries due to the divergent outlook for economic activity, the labor market and inflation expectations between the countries, the banks centrals still maintain their favorable monetary positions and buy programs by reducing them. Capacity utilization levels and other leading indicators indicate that domestic economic activity remains strong, although regional differences are emerging, with the gradually increasing positive impact of foreign demand. While the share of sustainable components in the composition of growth is increasing, energy price risks in the current account balance persist. It is important for price stability that the current account balance becomes permanent at sustainable levels. The council considered that the growth rate of loans, including long-term investment loans in Turkish liras, and the adequacy of accessible financing resources with economic activity according to their objective are important for stability. financial. In this context, the Board decided to strengthen the macroprudential policy system.
In the recent rise in inflation; Increases in energy costs caused by geopolitical developments, temporary effects of price formation away from economic fundamentals, strong negative supply shocks caused by increases in world prices for energy, food and agricultural raw materials continued to have an influence. The Council expects the disinflation process to begin with the restoration of the global environment of peace and the elimination of the base effects of inflation, as well as measures taken to establish lasting price and financial stability. In this context, the Board decided to keep the policy rate constant. The cumulative effects of the decisions taken are closely monitored, and a comprehensive process of reviewing the policy framework that encourages a permanent and reinforced reading of all the policy instruments of the CBRT continues during this period in order to institutionalize price stability in a way sustainable.
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 debt consolidation strategy, until the emergence of strong indicators indicating a permanent decline. inflation and the medium-term objective of 5% has been achieved. The stability to be achieved in the general price level will positively affect macroeconomic stability and financial stability through the fall in country risk premiums, the continuation of the reverse substitution of currencies and the upward trend in foreign exchange reserves, and the fall permanent financing costs. Thus, a fertile ground will be created for the continued growth of investment, production and employment in a healthy and sustainable manner.
The Board will continue to make its decisions in a transparent, predictable and data-driven framework.”