Central Bank raises policy rate by 200 basis points

The Central Bank held the last Monetary Policy Committee meeting of the year and raised the policy rate by 200 basis points. Thus, the one-week repo rate rose to 17 percent.

After the last MPC meeting of the year held today, the Central Bank raised the policy rate by 200 basis points to 17 percent. In the markets, the CBRT was expected to raise the interest rate by around 150 basis points.

875 points increase in the last 3 meetings

CBRT had raised interest rates by 675 basis points in its previous two meetings. Thus, with today’s meeting, the increase reached a total of 875 basis points in 3 meetings.

The dollar fell to 7.55 after the interest rate decision

The statement released after the meeting read as follows:

“Data on the global economy indicate that the partial recovery that started in the third quarter continues. However, despite the positive developments regarding vaccination, uncertainties regarding the global economy persist due to the recent increase in Covid-19 cases.

National income data and indicators for the last quarter point to a strong course in economic activity. However, the restrictions imposed due to the increasing number of cases create uncertainty regarding the short-term outlook of economic activity, particularly in the services sector. On the other hand, domestic demand, which gained strength due to the cumulative effects of the high credit growth during the pandemic, increases the current account deficit.

Domestic demand conditions, cumulative cost effects, particularly the exchange rate, the rise in international food and other commodity prices and the deterioration in inflation expectations continue to adversely affect the pricing behavior and inflation outlook. Accordingly, the Committee decided to implement a strong monetary tightening, taking into account the end-2021 forecast target, in order to eliminate risks to the inflation outlook, contain inflation expectations and restore the disinflation process as soon as possible.

In the upcoming period, the tight monetary stance will be maintained decisively, taking into account all factors affecting inflation, until strong indicators point to a permanent fall in inflation and price stability.

The CBRT assessed that the permanent establishment of a low inflation environment would have a positive impact on macroeconomic and financial stability through lower country risk premiums, the onset of reverse currency substitution, an upward trend in foreign exchange reserves and a permanent decline in financing costs.

In its decision-making processes, the CBRT adopts a medium-term perspective and an analysis framework based on all factors affecting inflation and their interactions. It should be emphasized that any new data and news may cause the Committee to change its policy stance for the future.”

Source: https://www.dunya.com/finans/haberler/merkez-bankasi-politika-faizini-200-baz-puan-artirdi-haberi-604857

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