Breaking News: Central Bank announces final interest rate decision of the year

The Central Bank of the Republic of Türkiye (CBRT) Monetary Policy Committee (MPC) met today (December 26) under the chairmanship of Fatih Karahan.

Following the critical meeting, the final interest rate decision for 2024 was announced.

The Central Bank cut the policy rate by 250 basis points, bringing the rate to 47.50 percent.

This marks the first interest rate cut in 22 months.

The CBRT had kept the policy rate steady at 50 percent for the last 8 meetings.

"PRICING BEHAVIORS REMAIN A RISK FACTOR"

The statement from the Monetary Policy Committee included the following remarks:

"The underlying trend of inflation remained near flat in November. Leading indicators point to a decline in the underlying trend in December. Indicators for the final quarter show that domestic demand continues to slow, remaining at levels that support the decline in inflation. While core goods inflation continues to remain low, the improvement in services inflation is becoming more pronounced. Unprocessed food inflation appears moderate in December following its high course over the previous two months. Although inflation expectations and pricing behaviors show a tendency to improve, they continue to be a risk factor for the disinflation process.

EMPHASIS ON TIGHT MONETARY POLICY

The decisive stance in monetary policy is reducing the underlying trend of monthly inflation and strengthening the disinflation process through the rebalancing of domestic demand, real appreciation of the Turkish Lira, and improvement in inflation expectations. Increased coordination with fiscal policy will also make a significant contribution to this process. The tight monetary policy stance will be maintained until a significant and permanent decline in the underlying trend of monthly inflation is achieved and inflation expectations converge to the projected forecast range. Accordingly, the level of the policy rate will be determined in a way that ensures the tightness required by the projected disinflation process, taking into account inflation realizations and expectations. The Committee will take its decisions with an inflation-focused, cautious, and meeting-based approach. Monetary policy tools will be used effectively in the event of a significant and permanent deterioration in the inflation outlook.

DOOR LEFT OPEN FOR ADDITIONAL STEPS

In the event of developments outside of those projected in the credit and deposit markets, the monetary transmission mechanism will be supported by additional macroprudential steps. Liquidity conditions are being closely monitored, taking into account potential developments. Sterilization 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 reduce the underlying trend of inflation and reach the 5 percent target in the medium term, also taking into account the lagged effects of monetary tightening. Indicators regarding inflation and the underlying trend of inflation will be closely monitored, and the Committee will decisively use all tools at its disposal in line with its main objective of price stability.