The Monetary Policy Committee (MPC) of the Central Bank of the Republic of Turkey (CBRT) cut the one-week repo auction interest rate (policy rate) by 50 basis points from 11.25 percent to 10.75 percent.
In the announcement made by the CBRT regarding interest rates, it was reported that the MPC, which convened under the chairmanship of Central Bank Governor Murat Uysal, decided to cut the policy rate from 11.25 percent to 10.75 percent.
In the announcement, it was stated that the recent data showed that the recovery trend in economic activity continued.
In the announcement, it was stated that the improvement in the sectoral spread of economic activity continued, and although there are signs of recovery in investments and employment, the weak course persists.
In the announcement, it was stated that while the positive impact of the developments in competitiveness continued, the weakening in the global growth outlook partially slowed down external demand.
It was noted that while the contribution of net exports to growth declined, the recovery in the economy is expected to continue with the disinflation process and the improvement in financial conditions:
“However, the effects of developments in credit growth and composition on external balance and inflation are closely monitored. It is important for the macro policy mix that the current account balance, which has recently improved significantly, follows a moderate course in the upcoming period. The weak course of global economic activity and the low level of global inflation reinforce expectations that central banks of advanced economies will maintain accommodative monetary policies. On the other hand, the recently heightened uncertainties regarding global growth cause the demand for emerging market financial assets and risk appetite to fluctuate. In addition to protectionist measures, other uncertainties regarding global economic policies and geopolitical developments, the possible effects of the recent pandemic on capital flows, foreign trade and commodity prices are closely monitored.”
“Measured discount”
In the announcement, it was stated that the trends of core inflation indicators followed a mild course due to the developments in inflation expectations, domestic demand conditions and producer prices.
It was stated that the improvement in macroeconomic indicators, particularly inflation, supported the decline in the country risk premium and contributed to contain pressures on cost factors, and that the course of inflation was broadly consistent with the year-end forecast.
In this framework, the Committee decided to make a more measured cut in the policy rate, taking into account all factors affecting the inflation outlook.
At this point, it was assessed that the current monetary policy stance remained consistent with the targeted disinflation path, and the announcement stated the following:
“The Committee assesses that the continuation of the disinflation process is of great importance for the decline in the country risk premium, the decline in long-term interest rates and the strengthening of the economic recovery. The cautious monetary policy stance should be maintained to ensure that the disinflation process is realized in line with the targeted path. Accordingly, the monetary stance will be determined in a way to ensure sustained disinflation by taking into account the underlying indicators. The Central Bank will continue to use all available tools in line with the objectives of price stability and financial stability.”
In the announcement, it was emphasized that any new data and news to be announced may cause the Committee to change its policy stance for the future, and it was stated that the Summary of the MPC Meeting will be published within five business days.
Source: https://www.aa.com.tr/tr/ekonomi/merkez-bankasi-politika-faizini-yuzde-10-75e-indirdi/1738477
