Deniz Kılınç / London, January 20 (HNA) – The Monetary Policy Committee (MPC) of the Central Bank of the Republic of Turkey (CBRT) has decided to keep the policy rate (one-week repo auction rate) constant at 14 percent in line with the expectations, after rate cuts for four consecutive months.
The CBRT cut the policy rate from 19 percent to 14 percent, with a total cut of 500 basis points in September, October, November and December. In the surveys of Reuters News Agency with 16 participants and Bloomberg HT with 19 participants, the expectation was that the CBRT would not change the 14 percent policy rate.
The increase in inflation in the recent period has been driven by distorted pricing behavior due to unhealthy price formations in the foreign exchange market, supply-side factors such as the rise in global food and agricultural commodity prices, supply constraints, and demand developments, said in the MPC statement and added:
“The Committee expects disinflation process to start on the back of measures taken for sustainable price and financial stability along with the decline in inflation owing to the base effect. Accordingly, the Committee has decided to keep the policy rate unchanged. While cumulative impact of the recent policy decisions is being monitored, to create a foundation for sustainable price stability, the comprehensive review of the policy framework is being conducted with the aim of prioritizing Turkish lira in all policy tools of the CBRT.”
The CBRT would continue to use decisively all available instruments until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is achieved in pursuit of the primary objective of price stability, said in the MPC statement, and went on as follows:
“Stability in the general price level will foster macroeconomic stability and financial stability through the fall in the country risk premium, continuation of the reversal in currency substitution and the upward trend in foreign exchange reserves, and durable decline in financing costs. This would create a viable foundation for investment, production, and employment to continue growing in a healthy and sustainable way.”