The policy interest rate decision taken by the CBRT Monetary Policy Board after the September meeting, which the markets have been eagerly awaiting, has been announced.
The Central Bank of the Republic of Turkey (CBRT) Monetary Policy Committee (MPC) met today under the chairmanship of Central Bank Governor Sahab Kavcioglu.
At the end of the Central Bank’s September meeting, the one-week repo tender interest rate, which is the policy interest rate, was 12 percent.
Policy rate cut from 13 per cent to 12 per cent
In the summary of the meeting, “The Monetary Policy Committee (Board) decided to reduce the one-week repo tender interest rate, which is the policy interest rate, from 13 percent to 12 percent.” it was said.
Strong growth was experienced in the first half of 2022
A strong growth was observed in the first half of 2022. Since the beginning of July, leading indicators have been pointing to a slowdown in growth due to the impact of weakening external demand. Employment gains are more positive compared to similar economies. Especially when the sectors contributing to the increase in employment are taken into account, 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 course of energy prices and the possibility of the main export markets entering recession keep the risks on the current account balance alive. The fact that the current account balance becomes permanent at sustainable levels is important for price stability.
The board decided to cut the policy rate by 100 basis points
The observed rise in inflation; energy cost increases caused by a delayed and indirect effects of geopolitical developments, pricing formations away from the effects of economic fundamentals, global energy, food, and strong negative supply shocks created by the increase in agricultural commodity prices continues to be effective. The Board foresees that the disinflationary process will begin with the restoration of the global peace environment, along with the steps taken and decisively implemented to strengthen sustainable price stability and financial stability. However, leading indicators for the third quarter indicate that the loss of momentum in economic activity continues due to the impact of declining external demand. At a time when uncertainties and geopolitical risks for global growth are increasing, it is important that financial conditions are supportive in terms of maintaining the momentum achieved in industrial production and the upward trend in employment. In this context, the Board decided to reduce the policy interest rate by 100 basis points and assessed that the updated policy interest level is sufficient under the current outlook. In order to institutionalize price stability in a sustainable way, the CBRT is continuing the process of reviewing a comprehensive policy framework that encourages permanent and strengthened lira in all policy instruments. Credit, collateral and liquidity policy steps, the evaluation processes of which have been completed, will continue to be used to strengthen the effectiveness of the monetary policy transmission mechanism.
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