The Monetary Policy Committee (MPC) of the Central Bank of the Republic of Turkey (CBRT) announced its October interest rate decision. Accordingly, the bank left the policy rate (one-week repo auction rate) unchanged at 50 percent within expectations.
The Central Bank had raised interest rates by a total of 4,150 basis points in 9 meetings, 650 basis points in June, 250 basis points in July, 750 basis points in August, 500 basis points each in September, October and November, 250 basis points each in December and January and 500 basis points in March. The Bank left interest rates untouched in February, April, May, June, July, August and September.
The statement released by the CBRT on its official website is as follows:
In September, the underlying trend of inflation posted a slight increase. Indicators for the third quarter suggest that domestic demand continues to slow down, approaching disinflationary levels. While core goods inflation remains low, the improvement in services inflation is expected to occur in the last quarter. However, the uncertainty regarding the pace of improvement in inflation has increased in light of incoming data. The Committee noted that inflation expectations and pricing behavior continue to pose risks to the disinflation process.
The decisiveness regarding tight monetary stance will bring down the underlying trend of monthly inflation through moderation in domestic demand, real appreciation in Turkish lira, and improvement in inflation expectations. Consequently, the disinflation process will gain strength. The Committee decided to keep the policy rate unchanged, but reiterated that it remains highly attentive to inflation risks. The tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the projected forecast range. Monetary policy tools will be used effectively in case a significant and persistent deterioration in inflation is foreseen.
In case of unanticipated developments in credit and deposit markets, monetary transmission mechanism will be supported via additional macroprudential measures. Liquidity conditions are assessed with respect to prospective developments and closely monitored. Sterilization tools will continue to be implemented effectively.
Taking into account the lagged effects of monetary tightening, the Committee will make its policy decisions so as to create the monetary and financial conditions necessary to ensure a decline in the underlying trend of inflation and to reach the 5 percent inflation target in the medium term.
Indicators of inflation and underlying trend of inflation will be closely monitored, and the Committee will decisively use all the tools at its disposal in line with its main objective of price stability.
The Committee will make its decisions in a predictable, data-driven and transparent framework.
The summary of the Monetary Policy Committee Meeting will be released within five working days.
