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The Central Bank has kept the policy rate unchanged this month, in line with market expectations.
The bank had cut the rates for four months in a row, from 19 percent in September to 14 percent in December.
"Increase in inflation in the recent period has been driven by distorted pricing behavior due to unhealthy price formations in the foreign exchange market, supply-side factors such as the rise in global food and agricultural commodity prices, supply constraints, and demand developments," the bank stated today (January 20).
"The Committee expects the disinflation process to start on the back of measures taken for sustainable price and financial stability, along with the decline in inflation owing to the base effect.
"Accordingly, the Committee has decided to keep the policy rate unchanged. While the cumulative impact of the recent policy decisions is being monitored, to create a foundation for sustainable price stability, the comprehensive review of the policy framework is being conducted with the aim of prioritizing Turkish lira in all policy tools of the CBRT.
"The CBRT will continue to use decisively all available instruments until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is achieved in pursuit of the primary objective of price stability."
The course of interest rate in TurkeyAfter Central Bank Governor Murat Çetinkaya was removed from office and Murat Uysal was appointed in his place, the Monetary Policy Committee took its first decision of interest rate cut in July 2019 and cut the policy rate from its current level of 24 percent to 19.75 percent. After its meeting on September 12, 2019, the Monetary Policy Committee of the Central Bank lowered the policy rate to 16.50 percent. The Committee reduced the interest rate to 14 percent on October 24, to 12 percent on December 12 and to 11.25 percent on January 16, 2020. On February 19, the Central Bank decreased the policy interest rate from 11.25 percent to 10.75 percent. In the meeting on March 17, the policy interest rate was reduced from 10.75 to 9.75 percent. In its meeting on April 22, the Bank decreased the policy interest rate from 9.75 to 8.75 percent. On May 21, the interest rate was further reduced to 8.25 percent. The Bank kept this rate unchanged in June, July and August. In its September meeting, the Monetary Policy Committee of the Central Bank decided to increase the policy rate (one-week repo auction rate) from 8.25 to 10.25 percent. The interest rate was kept constant on October 22. On November 7, 2020, Naci Ağbal was appointed as the new Governor of the Central Bank of Turkey by a Presidential decree. The Central Bank announced an interest rate hike, raising the policy rate from 15 to 17 percent in December 2020. It kept the policy rate (one-week repo auction rate) constant at 17 percent in January 2021. At the meeting on March 18, the policy rate was increased from 17 to 19 percent. Following this move, Central Bank Governor Naci Ağbal was dismissed by a Presidential decision and replaced by Şahap Kavcıoğlu. In the first meeting on April 15 after this appointment, the interest rate was kept unchanged at 19 percent, a rate which was also kept steady in the following meeting of the Monetary Policy Committee on May 6. After keeping the interest rate constant in the next three months, the Central Bank hiked it by 200 basis points in September. On November 7, Murat Uysal was dismissed as the governor of Central Bank. Former Finance Minister Naci Ağbal, his replacement, increased the policy rate by 475 basis points from 10.25 to 15 percent on November 19. The Central Bank further increased the policy rate by 200 basis points to 17 percent on December 24. After the interest rate was raised to 19 percent on March 18, the president dismissed Ağbal and appointed Şahap Kavcıoğlu, an economist and a pro-government columnist, instead. Headed by Kavcıoğlu the Central Bank cut the interest rate by 100 basis points on September 23. The bank lowered the policy rate in the following three months to 14 percent in December. It kept the rate constant in January. |
(HA/VK)
