The Central Bank (CBRT) decided to keep the policy rate constant at 14 percent at its meeting today. In the statement made by the CBRT, it was stated:
“The Monetary Policy Committee (the Committee) has decided to keep the one-week repo auction rate, which is the policy rate, at 14 percent.
Variations in the epidemic and increasing geopolitical risks keep the downside risks on global economic activity alive and lead to increased uncertainties. The recovery in global demand, the high course of commodity prices, supply constraints in some sectors, especially energy, and the high level of transportation costs lead to an increase in producer and consumer prices on an international scale. The effects of high global inflation on inflation expectations and international financial markets are closely monitored. However, central banks of developed countries consider that the rise in inflation may take longer than expected due to rising energy prices and supply-demand mismatch. In this context, despite the divergence in the monetary policy communications of the central banks of developed countries due to the differing outlook in economic activity, labor market and inflation expectations among countries, central banks still maintain their supportive monetary stances and continue their asset purchase programs.
Capacity utilization levels and other leading indicators point to a strong course of domestic economic activity with the positive impact of foreign demand. While the share of sustainable components in the composition of growth will increase, the current account balance is expected to have a surplus in 2022. The continuation of the improvement trend in the current account balance is important for price stability. The Board considers that long-term Turkish lira investment loans will play an important role in achieving this goal.
In the recent rise in inflation; Supply-side factors such as pricing formations far from economic fundamentals, increases in global energy, food and agricultural commodity prices, and disruptions in supply processes and demand developments are influential. The Board anticipates that the disinflationary process will begin with the elimination of base effects in inflation, along with the steps taken to establish sustainable price stability and financial stability. In this framework, the Board decided to keep the policy rate constant. The cumulative effects of the decisions taken are closely monitored, and a comprehensive policy framework review process that encourages permanent lira depreciation in all policy instruments of the CBRT is carried out in order to reshape price stability on a sustainable basis in this period.
In line with the main objective of price stability, the CBRT will resolutely continue to use all the tools at its disposal within the framework of the liraization strategy, until strong indicators pointing to a permanent decline in inflation emerge and the medium-term 5 percent target is achieved. The stability to be achieved in the general level of prices will positively affect macroeconomic stability and financial stability through the decrease in country risk premiums, the continuation of reverse currency substitution and the upward trend in foreign exchange reserves, and the permanent decline in financing costs. Thus, a suitable ground will be created for the continuation of investment, production and employment growth in a healthy and sustainable way.
The Board will continue to take its decisions in a transparent, predictable and data-oriented framework. The Monetary Policy Committee Meeting Summary will be published within five working days.”
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