The Central Bank's decision regarding the bank interest rate.
The Monetary Policy Committee of the Central Bank of the Republic of Turkey has increased the one-week repo auction rate, which is the policy rate, by 500 basis points to 40 percent. The Monetary Policy Committee chaired by Hafize Okan, the Governor of the Central Bank of Turkey, held a meeting.
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The Monetary Policy Committee of the Central Bank of the Republic of Turkey has raised the one-week repo auction rate, which is the policy rate, by 500 basis points to 40 percent. The committee, chaired by Hafize Gaye Erkan, convened for this session. During the meeting, the interest rate was increased by 500 basis points to reach 35 percent.
The press statement regarding interest rates mentioned the following: The Monetary Policy Committee (Board) decided to raise the one-week repo auction rate from 35 percent to 40 percent. The inflation at the beginning of the quarter, which slightly decreased in October, aligns with the outlook presented in the latest inflation report.
The current level of domestic demand, service prices, and geopolitical risks keeps inflationary pressures alive. On the other hand, short-term indicators suggest the beginning of a balance in domestic demand as monetary tightening is reflected in financial conditions. The committee also assesses that there has been limited improvement in inflation expectations and pricing behavior.
Improvement in external financing conditions, a continuous rise in reserves, support for current account demand balance, and increasing domestic and foreign demand for Turkish lira assets strongly contribute to exchange rate stability and the effectiveness of monetary policy. In this context, a decrease in the main monthly inflation trend has been observed.
The board has assessed that the level of monetary tightness required to significantly reduce inflation has been reached. In this regard, the rate of monetary contraction has decreased, and the stages of contraction are expected to conclude in a short period. It has been evaluated that the necessary monetary tightness for establishing permanent price stability will be maintained for as long as needed.
The board is simplifying the existing micro and macroprudential framework in a way that enhances the functioning of market mechanisms and strengthens macro-financial stability. While the interest rates align with the targeted tightening level, it is anticipated that regulations increasing the share of Turkish lira deposits and monetary contractions will continue to support the transmission mechanism and improve the funding composition of the banking system.
In addition to decisions regarding interest rates, the board will continue to make quantitative decisions for monetary contractions. Considering the cumulative and lagged effects of monetary tightening, the board determines policy decisions aimed at creating monetary and financial conditions that will reduce the primary trend of inflation and reach the 5% target in the medium term.
Indicators related to inflation and its core trend are monitored closely, and the board will resolutely continue to utilize all available tools in pursuit of its primary goal of price stability. The board will carry out its decisions within a predictable, data-driven, and transparent framework.
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