The Central Bank of the Republic of Turkey’s latest interest rate decision for July has been announced. The Central Bank’s Monetary Policy Committee kept the policy rate, the one-week repo auction rate, unchanged at 50%. The Central Bank left its policy rate unchanged at its previous meeting. Economists had expected the CBRT to keep the interest rate decision unchanged.
The central bank statement said inflation would rise temporarily in July and that the increase in the main trend would remain limited. The CBRT document stressed that the tight policy stance would continue, saying “the monetary policy stance would be tightened if a significant and persistent deterioration in inflation is expected.”
The central bank had raised interest rates to 50 percent, citing a “deteriorating inflation outlook,” when it was expected they would remain unchanged before the local elections on March 31, but the CBRT also avoided raising interest rates and kept interest rates at 50 percent in April, May and June.
The CBRT statement said:
“The Monetary Policy Committee decided to keep the policy rate, the one-week repo auction rate, constant at 50 percent.
The underlying trend in monthly inflation recorded a significant slowdown in June. Leading indicators point to a temporary upturn in monthly inflation in July as a result of administered price and tax adjustments, which are relatively outside the scope of monetary policy influence, and supply-side developments in unprocessed food prices. Meanwhile, the upturn in the main trend is expected to remain relatively limited. Recent indicators confirm that domestic demand continues to slow, although inflation remains at a level. Inflationary pressures persist due to services inflation, inflation expectations, geopolitical risks, and persistently high and sticky food prices. The Board is closely monitoring whether inflation expectations and pricing behavior are in line with expectations.
“The monetary tightening stance will be maintained.”
The impact of monetary tightening on lending and domestic demand is being closely monitored. The Governing Council decided to keep the policy rate unchanged taking into account the delayed effects of monetary tightening, but reiterated its cautious stance on upside risks to inflation. The tightening stance of monetary policy will be maintained until there is a significant and persistent decline in the underlying trend in monthly inflation and inflation expectations converge to the forecast range. If a significant and persistent deterioration in inflation is forecast, the monetary policy stance will be tightened. A firm stance in monetary policy. This will keep the underlying trend in monthly inflation in check and strengthen the disinflation process through the rebalancing of domestic demand, real appreciation of the Turkish lira and improvement in inflation expectations.
“Make effective use of sterile equipment when necessary.”
Taking into account the growth and composition of loans, additional measures have been taken on foreign currency loans to support macro-financial stability and the monetary transmission mechanism. In the event of any unexpected developments in the credit and deposit markets, additional macroprudential measures will continue to support the monetary transmission mechanism. The liquidity situation will be closely monitored in light of possible developments. Sterilization tools will also be diversified and will be used effectively as necessary.
The Governing Council will decide on policy measures aimed at containing the main trends in inflation and providing monetary and financial conditions conducive to moving inflation closer to the 5 percent objective over the medium term, taking into account the delayed effects of monetary tightening.
Indicators of inflation and its main trends will be closely monitored and the Governing Council will use all tools at its disposal resolutely, in line with the primary objective of price stability.
“The Board will make decisions within a predictable, data-driven and transparent framework.”
Latest USD/TL after interest rate decision
The latest on the market after the Central Bank’s interest rate decision leaves doubts. Following the CBRT decision, USD/TL continued its horizontal movement. 1 USD is currently trading at 32.9382TL. EUR/TL finds buyers at 35.80. Borsa Istanbul BIST 100 index is at 11,085.52 points.
