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

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

Following the critical meeting, the policy rate, which the markets were waiting for with anticipation, was announced.

The CBRT MPC went for a 100 basis point cut in the policy rate. Thus, the policy rate was reduced from 38 percent to 37 percent.

CBRT'S DECISION TEXT

In the CBRT decision text, it stated, “The Monetary Policy Committee (the Committee) has decided to reduce the one-week repo auction rate, which is the policy rate, from 38 percent to 37 percent. The Committee has also reduced the overnight lending rate from 41 percent to 40 percent, and the overnight borrowing rate from 36.5 percent to 35.5 percent.”

"THERE IS A RISK FACTOR"

The Central Bank assessed, “The underlying trend of inflation declined in December. Leading indicators suggest that monthly consumer inflation in January increased, led by food, while the increase in the underlying trend remained limited. Indicators for the last quarter imply that the support of demand conditions to the disinflation process continues, albeit with a decrease. Although inflation expectations and pricing behaviors show signs of improvement, they continue to be a risk factor for the disinflation process.”

"IF THERE IS A DEVIATION IN INFLATION, THE MONETARY POLICY STANCE WILL BE TIGHTENED"

The CBRT commented, “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. The magnitude of the steps is reviewed with a cautious, meeting-based approach focused on the inflation outlook. In the event of a significant deviation of the inflation outlook from the intermediate targets, the monetary policy stance will be tightened.”

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

THE MPC MEETING IN DECEMBER

In the last MPC meeting held in December, the policy rate had been reduced by 150 basis points to 38 percent.

News Source: 12punto