Central Bank announced the interest rate decision!

The interest rate decision, which was eagerly awaited by the markets, was announced.

The Central Bank of the Republic of Turkiye announced the last interest rate decision of the year. Accordingly, the Monetary Policy Committee (MPC) of the Central Bank increased the policy rate, the one-week repo auction interest rate, by 250 basis points to 42.50 percent.

The Central Bank had raised interest rates by 650 basis points in June, 250 basis points in July, 750 basis points in August, 500 basis points in September, October and November, totalling 3,150 basis points in six meetings.

The next meeting of the Central Bank will be held on 25 January.

The text of the decision is as follows;

"Headline inflation, which recorded a limited increase in November, is in line with the outlook presented in the last Inflation Report. The current level of domestic demand, rigidity in services prices and geopolitical risks keep inflation pressures alive. On the other hand, recent indicators suggest that domestic demand continues to rebalance as the monetary tightening is reflected on financial conditions. The Committee also assesses that inflation expectations and pricing behaviour have started to improve slightly. The significant improvement in external financing conditions, the ongoing increase in reserves, the support of the rebalancing in demand to the current account and the strengthening domestic and foreign demand for Turkish lira assets contribute strongly to exchange rate stability and the effectiveness of monetary policy. Accordingly, the underlying trend of monthly inflation continues to decline.

The Committee assessed that the level of monetary tightness required for disinflation has approached significantly and slowed down the pace of monetary tightening. The Committee expects to complete the monetary tightening steps as soon as possible. The monetary tightening required for the permanent establishment of price stability will be maintained as long as necessary.
The Committee simplifies the current micro and macroprudential framework in a way to enhance the functionality of the market mechanism and strengthen macro financial stability. Loan rates are assessed to be in line with the targeted level of financial tightness, while arrangements to increase the share of Turkish lira deposits are expected to continue to strengthen the transmission mechanism and improve the funding composition of the banking system amid monetary tightening. In addition to interest rate decisions, the Committee will continue with quantitative tightening by increasing the variety of sterilisation tools to support the monetary tightening process.

Taking into account the cumulative and lagged effects of monetary tightening, the Committee will continue to determine its policy decisions in a way to provide the monetary and financial conditions that will bring the underlying trend of inflation down and achieve the 5 percent target in the medium term.

Indicators regarding inflation and the underlying trend of inflation will be closely monitored and the Committee will continue to use all available tools decisively in line with the main objective of price stability."