The Central Bank of the Republic of Turkey (CBRT) did not change the interest rate.
The written statement from the CBRT is as follows: “The Monetary Policy Committee (Board) has decided to keep the one-week repo auction rate, which is the policy rate, at 9 percent.
The pioneering data released point out that the concerns about the recession in the economies of developed countries continue with the effect of ongoing geopolitical risks and interest rate hikes. Despite the negative effects of supply constraints in some sectors, especially in basic food, thanks to the strategic solution tools developed by Turkey, producer and consumer inflation on an international scale continues to be high. The effects of high global inflation on inflation expectations and international financial markets are closely monitored. Depending on the economic outlook that differs between countries, the divergence in the monetary policy steps and communications of the central banks of developed countries continues to increase. It is observed that efforts to find solutions with new supportive practices and tools developed by central banks for increasing uncertainties in financial markets continue. In addition, financial markets started to reflect on the expectations that the central banks, which increased interest rates against increasing recession risks, would soon end their interest rate hike cycles.
Strong growth was realized in the first three quarters of 2022. Leading indicators for the last quarter of the year, on the other hand, point out that the slowdown in growth due to the weakening foreign demand continues. However, the effects of external demand-driven pressures on the manufacturing industry on domestic demand and supply capacity remain limited for now. Employment gains are more positive than comparable economies. Considering the sectors that contribute to the increase in employment, it is seen that the growth dynamics are supported by structural gains. While the share of sustainable components in the composition of growth is increasing, the strong contribution of tourism to the current account balance, which exceeds expectations, continues. In addition, the high level of energy prices and the possibility of a recession in the main export markets keep the risks on the current account balance alive. It is important for price stability that the current account balance becomes permanent at sustainable levels. The growth rate of the loans and the meeting of the financial resources reached with the economic activity in accordance with its purpose are closely monitored. The Board will resolutely continue to use its tools to support the effectiveness of the monetary transmission mechanism and will align the entire policy toolkit, particularly the funding channels, with the liraization targets. The policies to be implemented will be announced comprehensively in the Monetary and Exchange Rate Policy for 2023, which will be announced in December.
In the rise observed in inflation; The lagged and indirect effects of energy cost increases caused by geopolitical developments, the effects of pricing formations far from economic fundamentals, and strong negative supply shocks caused by increases in global energy, food and agricultural commodity prices were effective. The Board foresees that the disinflationary process will begin with the re-establishment of the global peace environment, together with the steps taken and determinedly implemented to strengthen sustainable price stability and financial stability. The effects of decreasing foreign demand on aggregate demand conditions and production are closely monitored. In a period when uncertainties regarding global growth and geopolitical risks increase, it is critical that financial conditions be supportive in terms of maintaining the acceleration in industrial production and the increasing trend in employment and the sustainability of structural gains in supply and investment capacity. In this context, the Board decided to keep the policy rate constant. The Committee assessed that the current policy rate is at a sufficient level, taking into account the increasing risks to global demand. In order to institutionalize price stability in a sustainable way, the CBRT continues to review a comprehensive policy framework that encourages permanent and strengthened liraization in all policy instruments. Credit, collateral and liquidity policy steps, whose evaluation processes have been completed, will continue to be used to strengthen the effectiveness of the monetary policy transmission mechanism.
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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