Changes Ahead: CBRT Announces Last Minute Interest Rate Decision

The Central Bank of the Republic of Turkey surprised the markets by raising the benchmark interest rate by 500 basis points to 50 percent at its March meeting. This decision was made in response to the higher-than-expected monthly inflation in February, driven by services inflation. The bank also highlighted the continued resilience in domestic demand and the inflation pressures stemming from services, inflation expectations, geopolitical risks, and food prices.

In the decision text of the Central Bank Monetary Policy Committee, it was stated that the tight monetary policy stance would be maintained until a significant and permanent decline in the underlying trend of monthly inflation is achieved. The bank also emphasized that it would tighten policy further if there is a significant and permanent deterioration in inflation.

The Board is committed to implementing macroprudential policies to protect market functionality and macro financial stability. It will continue to monitor liquidity developments and use sterilization tools effectively when necessary to support the monetary transmission mechanism.

Overall, the Central Bank aims to reduce the main trend of inflation and bring inflation to the 5 percent target in the medium term. It will closely monitor inflation indicators and make policy decisions accordingly to ensure price stability.

The Board’s decision to raise the interest rate reflects its determination to address inflationary pressures and steer the economy towards disinflation in the second half of 2024. Investors and economists will be watching closely to see how these measures impact the Turkish economy in the coming months.

 

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