Breaking News... Markets were waiting with anticipation: Central Bank announces April interest rate decision!

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

Following the meeting, the committee announced the interest rate decision that the markets had their eyes and ears on.

The Central Bank kept the interest rate steady at 37 percent in April.

The MPC stated that the underlying trend of inflation weakened in March, while noting that leading indicators point to a limited increase in April. The committee assessed that high levels and a volatile outlook persist in energy prices due to uncertainties created by geopolitical developments. It was stated that with these developments, the effects of domestic energy prices on the inflation outlook through costs and economic activity are being closely monitored.

"While indicators point to a slowdown in economic activity, the potential secondary effects of recent developments on the inflation outlook will be significant," the MPC stated, emphasizing that the tight stance in monetary policy will continue, and continued its statement with the following words:

“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, its underlying trend, and expectations. Monetary policy decisions are taken with an inflation-focused, meeting-based, and cautious approach. In the event of a significant and permanent deterioration in the inflation outlook, also influenced by recent developments, the monetary policy stance will be tightened. The committee has emphasized its cautious stance against upside risks to inflation.”

ADDITIONAL MEASURES MAY BE ON THE AGENDA

The committee stated that if developments outside of expectations occur in credit and deposit markets, the monetary transmission mechanism will be supported by additional macroprudential measures. Furthermore, it was stated that liquidity conditions will continue to be monitored and that liquidity management tools will be used effectively.

5 PERCENT TARGET REITERATED

The TCMB once again emphasized the medium-term inflation target of 5 percent. “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.” were the expressions included.

***

WHAT WERE THE MARKET EXPECTATIONS?

According to the expectation survey conducted by AA Finance with the participation of 37 economists, it was predicted that there would be no change in the policy rate in April and that the rate would be left at 37 percent.

In the survey, expectations for the April meeting were also shared. Accordingly, the policy rate estimate for the first meeting was calculated as 37.75 percent, 37.38 percent for the second meeting, and 36.53 percent for the third meeting.

The economists' policy rate expectation for 12 months ahead had risen to the 29.56 percent level.