Turkey’s Central Bank keeps policy rate constant at 8.25 percent

Click to read the article in Turkish

The Central Bank of the Republic of Turkey (TCMB) Monetary Policy Committee convened today (August 20) and has decided to keep the one-week repo auction rate (policy rate) at its current level of 8.25 percent.

Chaired by Central Bank Chair Murat Uysal, the Monetary Policy Committee has released a statement following their meeting.

"While global economic activity has shown signs of partial recovery in the third quarter following the normalization steps taken by several countries, uncertainties on global economic recovery remain high," the statement has read, briefly adding the following:

'Uncertainties remain significant'

"Economic recovery, which started in May following gradual steps towards normalization, is gaining pace.

"Recent monetary and fiscal measures that aim to contain negative effects of the pandemic on the Turkish economy contributed to financial stability and economic recovery by supporting the potential output of the economy.

"Along with the pandemic-related rise in unit costs, exchange rate and credit developments restrain the demand-side disinflationary effects, and the trends of core inflation indicators have increased.

"The gradual normalization of pandemic-specific financial measures and recent tightening steps taken in liquidity management are judged to support macrofinancial stability.

"However, depending on the course of the pandemic, uncertainties regarding domestic and external demand conditions remain significant. Accordingly, the Committee decided to keep the policy rate unchanged, while continuing with liquidity measures."

The course of interest rate in Turkey

The Central Bank's interest rate cut in May 2020 marked the ninth interest rate cut in a row. After 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 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.

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 further decreased the policy interest rate from 9.75 percent 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 and July. (HA/SD)