Breaking News: Central Bank announces the interest rate decision markets were eagerly awaiting!

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

Following the meeting, which had the eyes and ears of the markets turned toward it, the eagerly awaited interest rate decision was announced.

The CBRT MPC lowered the policy rate by 250 basis points, reducing it from 43 percent to 40.5 percent.

The Central Bank's statement is as follows:

"The Monetary Policy Committee (the Committee) has decided to reduce the one-week repo auction rate, which is the policy rate, from 43 percent to 40.5 percent. The Committee also reduced the Central Bank's overnight borrowing interest rate from 46 percent to 43.5 percent, and the overnight lending interest rate from 41.5 percent to 39 percent.

The underlying trend of inflation slowed in August. While growth in the second quarter exceeded forecasts, it was assessed that final domestic demand maintained its weak course. Data regarding the recent period indicate that demand conditions are at a disinflationary level. Food prices and service items with high inertia keep upward pressures on inflation alive. Inflation expectations, pricing behaviors, and global developments continue to be risk factors for the disinflation process.

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 macroeconomic framework envisaged in the Medium-Term Program will contribute to this process. 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 will be reviewed with a cautious approach focused on the inflation outlook and on a meeting-by-meeting basis. In the event that the inflation outlook deviates significantly from the intermediate targets, the monetary policy stance will be tightened.

In case of developments in the credit and deposit markets outside of what is foreseen, 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 to reach the 5 percent inflation target in the medium term. The Committee will take its decisions within a predictable, data-driven, and transparent framework.

The Summary of the Monetary Policy Committee Meeting will be published within five business days."

WHAT WERE THE EXPECTATIONS?

Of the economists participating in the AA Finance expectation survey, 18 had predicted a 200 basis point cut in the policy rate, 3 had predicted a 250 basis point cut, and 5 had predicted a 300 basis point cut.

The median of the economists' expectations for the September MPC decision was for the policy rate to be lowered by 200 basis points to 41 percent.

While year-end policy rate expectations were at 36.5 percent, the policy rate had been lowered by 300 basis points to 43 percent at the MPC meeting held in July.

News Source: 12punto