The Central Bank of the Republic of Turkey (CBRT) left the policy rate unchanged at 50%. Expectations were for it to remain unchanged.
Thus, the CBRT has left the policy rate unchanged for 6 months. The CBRT made the last policy rate change in March 2024 by increasing it from 45% to 50%.
The phrase “If a significant and permanent deterioration in inflation is anticipated, the monetary policy stance will be tightened” in the August text was changed to “If a significant and permanent deterioration in inflation is anticipated, monetary policy tools will be used effectively.” This was interpreted as preparation for interest rate cuts.
While it was stated in the text that no significant change was observed in August inflation, it was stated that the improvement in services inflation would be seen in the last quarter. It was stated in the text that tight monetary policy would be maintained until a significant and permanent decrease was achieved in the main trend of monthly inflation.
The statement of the Monetary Policy Committee is as follows;
“Yaşar Fatih Karahan (President), Osman Cevdet Akçay, Elif Haykır Hobikoğlu, Hatice Karahan, Fatma Özkul.
The Monetary Policy Committee (the Committee) decided to keep the one-week repo auction rate, which is the policy rate, constant at 50 percent.
When the monthly inflation indicators in August are examined as a whole, it is assessed that the main trend has not exhibited a significant change. The indicators for the third quarter confirm that domestic demand continues to slow down and its inflationary effect has diminished. While core goods inflation continues to be low with a limited increase, improvement in services inflation is expected in the last quarter. The Committee noted that inflation expectations and pricing behaviors continue to be risk factors for the disinflation process.
The determined stance in monetary policy will reduce the underlying trend of monthly inflation and strengthen the disinflation process through balancing domestic demand, real appreciation of the Turkish lira and improvement in inflation expectations. The Committee decided to keep the policy rate constant, but reiterated its cautious stance against upward risks to inflation. The tight monetary policy stance will be maintained until a significant and permanent decrease is achieved in the underlying trend of monthly inflation and inflation expectations converge to the forecast range. In the event of a significant and permanent deterioration in inflation, monetary policy tools will be used effectively.
In case of unforeseen developments in credit and deposit markets, the monetary transmission mechanism will be supported with additional macroprudential steps. Liquidity conditions are closely monitored considering possible developments. Sterilization tools will continue to be used effectively.
The Committee will determine policy decisions in a way that will reduce the underlying trend of inflation and provide monetary and financial conditions that will bring inflation to the 5 percent target in the medium term, taking into account the lagged effects of monetary tightening.
Inflation and indicators of its main trend will be closely monitored, and the Board will resolutely use all tools at its disposal in line with the primary objective of price stability.
The Board will make its decisions within a predictable, data-driven and transparent framework.”
