Central Bank hikes interest rates by two points

Photo: AA

The Central Bank has announced an interest rate hike of two percentage points, raising the policy rate from 15 to 17 percent.

Following the move, the Turkish lira appreciated nearly one percent against the US dollar, which is currently traded at 7.58 lira.

"National income data and indicators for the last quarter point to a strong course in economic activity," the bank said in a statement.
"However, restrictions introduced due to the increasing number of cases create uncertainties on the short-run outlook of economic activity, particularly the services sector."

Tight monetary policy

"Domestic demand conditions, cumulative cost effects, in particular the exchange rate effects, increasing international food and other commodity prices and deterioration in inflation expectations continue to affect the pricing behavior and inflation outlook adversely.

"Accordingly, the MPC, taking into account the end-2021 forecast target, has decided to implement a strong monetary tightening, in order to eliminate risks to the inflation outlook, contain inflation expectations and restore the disinflation process as soon as possible.

"In the forthcoming period, tightness of monetary policy stance will be decisively sustained until strong indicators point to a permanent fall in inflation in line with the targets and to price stability."

In its last meeting on November 19, the Central Bank increased its one-week repo rate from 10.25 percent to 15 percent while taking steps to simplify the operational framework of monetary policy.

Speaking on Monday (December 21), Naci Ağbal, the bank's governor, said the risk of upward inflation will require a tight and decisive monetary policy stance in 2021, adding that it will be tightened if needed. (VK)