CBRT: Despite record price increases, rates remain on hold


The Central Bank of the Republic of Turkey kept interest rates constant in its third meeting in a row. The monetary policy committee did not change the 1-week repo rate at 14%, in line with all expectations. Recently, we have been drawing attention to the fact that the Central Bank is not in a position to take inflation into account while determining interest rates due to the perspective change. While many indicators reveal the orthodox policy requirements in line with inflation and exchange rate spiral risks, we have not formed our expectations from the Central Bank according to the indicators, but according to the signals of the Bank and the economy management. Accordingly, the desire to progress towards achieving the economic growth targets causes the Central Bank to keep the interest rates quite low.



Comparison of Turkey CPI, policy rate and inflation targeting… Source: Bloomberg

Highlights from the Central Bank’s decision and policy text;

The one-week repo rate remained unchanged at 14%. All 21 economists in the Bloomberg poll were expecting 14%.

Domestic economic activity remains strong with the help of strong foreign demand, although some regional differences have emerged.

Risks on the current account balance stemming from energy prices are closely monitored.

Sustainable current account balance is important for price stability. In the February MPC statement, it was predicted that the annual current account balance would turn into a surplus.

Loan growth, including long-term investment loans, and the targeted use of the funds reached for real economic activity are important for financial stability.

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