The Turkish Central Bank (CBRT) announced an interest rate hike of one percentage point above market expectations. The bank’s policy rate – also known as the one-week repo rate – was raised 200 basis points to 19%, up from 17%.
The downward movement in foreign exchange markets gained momentum after the Central Bank’s decision to hike the interest rate by 200 basis points. The decline in exchange rates is over 2%.
“Considering the upside risks to inflation expectations, pricing behavior, and the medium-term inflation outlook associated with these developments, the MPC [Monetary Policy Committee] has decided to implement a front-loaded and strong additional monetary tightening,” the bank said in a statement.
Taking into account the end-2021 forecast target, a tight monetary policy will be maintained until strong indicators point to a permanent fall in inflation and price stability, the bank added.
The USD/TRY, which was at the level of 7.46-7.47 before the decision, declined to 7.32 as the first reaction. EUR/TRY, which recorded similar performance, was also decreased from 8.92 to 8.80. Decline in EUR/TRY reached 8.76.
While the gains increased in Borsa Istanbul, the BIST 100 Index reached 1,570 points. Banking shares lead the rise in Borsa Istanbul with 2.5%.
