Breaking News: Central Bank keeps interest rates steady! Here is the full text of the decision

The Central Bank of the Republic of Türkiye (TCMB) Monetary Policy Committee (PPK) met under the chairmanship of Fatih Karahan.

Following the critical meeting, the interest rate decision, which the markets were eagerly awaiting, was announced.

The TCMB PPK has kept the policy rate steady at 37 percent.

In the TCMB decision text, it was stated: “The Monetary Policy Committee (the Committee) has decided to keep the policy rate, which is the one-week repo auction rate, steady at 37 percent. The Committee also kept the Central Bank's overnight lending interest rate at 40 percent and the overnight borrowing interest rate at 35.5 percent.”

The text, which stated that the underlying trend of inflation remained close to flat in February, included the following statements:

"While uncertainties have increased as a result of geopolitical developments, a deterioration in global risk appetite and an increase in energy prices have been observed. In order to limit the risks that these factors may pose to the inflation outlook, decisions supporting a tight monetary policy and fiscal measures in coordination have been taken. The effects of geopolitical developments on the inflation outlook through the cost channel and economic activity are being closely monitored.

The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels. The Committee will determine the steps to be taken regarding the policy rate in a way that ensures the tightness required by disinflation, in line with intermediate targets, by taking into account inflation realizations, the underlying trend, and expectations. Monetary policy decisions are taken with an inflation-focused, meeting-based, and cautious approach. With the effect of recent developments, the monetary policy stance will be tightened in case of a significant and permanent deterioration in the inflation outlook.

In case of developments outside of what is foreseen in the credit and deposit markets, the monetary transmission mechanism will be supported by additional macroprudential steps. Liquidity conditions will continue to be closely monitored and liquidity management tools will continue to be used effectively.

The Committee will determine its policy decisions in a way that will provide the monetary and financial conditions that will bring inflation to the 5 percent target in the medium term. The Committee will take its decisions within a predictable, data-driven, and transparent framework."

JANUARY PPK MEETING

At the meeting held in January, the policy rate, which is the one-week repo auction rate, had been reduced from 38 percent to 37 percent.

With the same decision, the overnight lending rate was lowered from 41 percent to 40 percent, while the overnight borrowing rate was reduced from 36.5 percent to 35.5 percent.

WHAT WERE THE MARKET EXPECTATIONS?

The results of the expectation survey conducted regarding the Monetary Policy Committee (PPK) meeting that the Central Bank of the Republic of Türkiye would hold today had been announced. 38 economists participated in the survey.

According to the survey, while 37 of the 38 economists predicted that the interest rate would be left at its current level, only 1 economist had estimated that a 50 basis point cut could be made.

The median of the economists' expectations regarding the March PPK decision was also that the policy rate would be kept steady at the 37 percent level.

On the other hand, the median of the policy rate expectations of the economists participating in the survey for the end of the year was calculated as 30 percent.

DURAN BÜLBÜL EVALUATED THE CENTRAL BANK'S DECISION

Economist Prof. Dr. Duran Bülbül, while evaluating the Central Bank's statement, drew attention to an important change in the decision text. Bülbül stated that the phrase “the magnitude of the reduction steps,” which was included in previous texts, had been removed, and said that this was an important signal.

According to Bülbül, this change shows that the Central Bank has moved to a more cautious monetary policy stance due to geopolitical developments and market conditions. In this context, it is evaluated that instead of accelerating the interest rate cut process, current levels may be maintained until conditions become clearer.

The TCMB also kept the overnight lending interest rate at 40 percent and the overnight borrowing interest rate at 35.5 percent.

Bülbül emphasized that the Central Bank's text also highlights that if there is a deterioration in the inflation outlook, tightening may come back to the agenda, and commented, “Monetary policy will continue to be conducted within a data-driven, meeting-based, and cautious framework.”

On the other hand, the Central Bank's reserve data was also announced. As of March 6, the TCMB's gross reserves are at the level of 197.5 billion dollars. Of this amount, 134.7 billion dollars consist of gold and 62.8 billion dollars consist of foreign exchange reserves.

In the same period, net reserves were calculated as 78.8 billion dollars, and net reserves excluding swaps were calculated as 65 billion dollars. The Central Bank's total swap amount was 13.8 billion dollars.

News Source: 12punto