Turkey's Central Bank keeps the policy rate constant for the 3rd time in a row

The Monetary Policy Committee of Turkey's Central Bank has once again decided to keep the policy rate (one-week repo auction rate) constant at 14 percent following its meeting today (March 17).

Chaired by Central Bank Governor Şahap Kavcıoğlu, the Monetary Policy Committee released a statement after its meeting. Referring to the recent increase in inflation and the Committee's "expectation for the disinflation process", the Bank has explained its decision briefly as follows:

"Increase in inflation in the recent period has been driven by rising energy costs resulting from the heightened regional conflict, temporary effects of pricing formations that are not supported by economic fundamentals, supply side factors such as the rise in global energy, food and agricultural commodity prices, supply constraints, and demand developments.

"The Committee expects the disinflation process to start on the back of measures taken and decisively pursued for sustainable price and financial stability along with the decline in inflation owing to the base effect and the resolution of the ongoing regional conflict. Accordingly, the Committee has decided to keep the policy rate unchanged."

The policy rate has been standing at 14 percent in Turkey since the meeting of the Monetary Policy Committee in December 2021.

Interest rate hike by Fed after 3 years

On the other side, the US Federal Reserve approved a 0.25 percentage point rate hike, the first increase since December 2018, yesterday.

As reported by Turkey's state-run Anadolu Agency (AA), the Fed's median federal funds rate projection was raised to 1.9 percent for the year 2022, which means that the central bank can hike rates by 25 basis points in each of its remaining six meetings this year.

TheUS Federal Reserve's median federal funds rate projection for the next year was raised to 2.8 percent from the previous level of 1.6 percent made in December. This means that the central bank can make an additional three rate hikes of 25 basis points each next year.

It does not, however, indicate any more rate hikes for 2024.

Central Bank's course of policy rate changes

In the period when Central Bank Governor Murat Çetinkaya was removed from office on July 6, 2019 and Murat Uysal was appointed in his place

In July 2019, from 24 percent to 19.75 percent
In September 2019, from 19.75 percent to 16.50 percent
In October 2019, from 16.50 percent to 14 percent
In December 2019, from 14 percent to 12 percent
In January 2020, from 12 percent to 11.25 percent
In February 2020, from 11.25 percent to 10.75 percent
In March 2020, from 10.75 percent to 9.75 percent
In April 2020, from 9.75 percent to 8.75 percent
In May 2020, from 8.75 percent to 8.25 percent
In September 2020, from 8.25 percent to 10.25 percent
In October 2020, from 10.25 percent to 15 percent

In the period when Murat Uysal was removed from office as the Central Bank Governor and Naci Ağbal was appointed in his place

In December 2020, from 15 percent to 17 percent
In March 2021, from 17 percent to 19 percent

In the period when Naci Ağbal was removed from office on March 20, 2021 and Şahap Kavcıoğlu was appointed in his place

In September 2021, from 19 percent to 18 percent
In October 2021, from 18 percent to 16 percent
In November 2021, from 16 percent to 15 percent
In December 2021, from 15 percent to 14 percent

* In the months that are not indicated in this table, the policy rate was kept unchanged (The Monetary Policy Committee of the Central Bank convenes every month).

(SD)

Turkey's Central Bank keeps the policy rate constant for the 3rd time in a row

İstanbul

Interest rate hike by Fed after 3 years

Central Bank's course of policy rate changes