The Monetary Policy Committee of the Central Bank of Turkey (TSMB) announced this Thursday its decision to increase its reference interest rates by 5,009 basis points (5 percentage points), raising them from 45 to 50 percent. This is the first meeting of the new Turkish governor Fatih Karahan, after the controversial departure of the previous governor Hafize Gaye Erkan in February.
The rate increase measure is accompanied by an adjustment to the operational framework of monetary policy, setting the central bank’s overnight borrowing and lending rates at 300 basis points below and above the overnight repo auction rate. a week, respectively. The new monetary tightening occurs in a context marked by the rebound in services inflation in February, which exceeded expectations by standing at 67% year-on-year.
“In response to the deteriorating inflation outlook, the Committee decided to increase the policy rate. A tight monetary stance will be maintained until a significant and sustained decline in the underlying monthly inflation trend is observed and inflation expectations converge. to the projected forecast range. The monetary policy stance will be supported in the event that a significant and persistent deterioration in inflation is expected,” the Turkish organization points out in its monetary policy statement.
The TCMB has also reaffirmed its commitment to macroprudential policies to preserve macrofinancial stability, tightening financial conditions and strengthening the transmission of monetary policy with those adopted in March. “It has been ensured that market liquidity will be maintained and sterilization tools will be used as necessary,” he notes.
In this way, the Turkish central bank continues its crusade to avoid hyperinflation with the objective of reaching the inflation goal of 5% in the medium term, a figure that is now light years from the current situation. Karahan’s TCMB is committed to remaining close to inflation indicators and the underlying trend, using “all available tools to ensure price stability,” according to the post-meeting statement.
