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 (Board) has decided to keep the one-week repo auction rate, which is the policy rate, at 14 percent.
The geopolitical risks that turned into conflicts and the variants in the epidemic keep the downside risks on the global and regional economic activity alive and cause further uncertainties. The recovery in global demand, the high course of commodity prices, the more evident supply constraints in some sectors, especially in 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 framework, although there is a 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 by reducing them.
Capacity utilization levels and other leading indicators point out that domestic economic activity remains strong with the positive impact of foreign demand, even if regional differences emerge. While the share of sustainable components in the composition of growth is increasing, the risks arising from energy prices in the current account balance are closely monitored. It is important for price stability that the current account balance becomes permanent at sustainable levels. The Board evaluated that the growth rate of loans, including long-term Turkish lira investment loans, and the meeting of the financing resources accessed with economic activity in accordance with their purpose will play an important role in financial stability.
In the recent rise in inflation; Supply-side factors such as increases in energy costs caused by the hot conflict environment, temporary effects of pricing formations away from economic fundamentals, increases in global energy, food and agricultural commodity prices, and disruptions in supply processes and demand developments are effective. The Board anticipates that the disinflationary process will begin with the re-establishment of the global peace environment and the elimination of base effects in inflation, together 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 and strengthened liraization in all policy instruments of the CBRT continues in this period in order to institutionalize price stability in a sustainable way.
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.”