Central Bank cuts policy rate again, Turkish Lira plummets to new low

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The Monetary Policy Committee of Turkey's Central Bank has decided to reduce the policy rate (one-week repo auction rate) from 15 percent to 14 percent following its meeting at 2 pm today (December 16).

Ahead of the Monetary Policy Committee meeting of the Central Bank, the depreciation of the Turkish Lira continued amid expectations that the policy rate would be cut further; the exchange rate of the US Dollar (USD) saw 15.28 Turkish Lira (TRY) earlier today. Following the policy rate cut, TRY has crashed to a new low and the USD exchange rate has hit 15.61 TRY. Before the decision was announced, 1 USD was 15.11 TRY.

Announcing the interest rate cut in a statement, the Central Bank, headed by Şahap Kavcıoğlu, has announced the decision briefly as follows:

"National income data and leading indicators show that domestic economic activity remains strong, with the help of robust external demand.

"The spread of domestic vaccination throughout the society facilitates the recovery in services, tourism and related sectors, which have been adversely affected by the pandemic, and leads to a more balanced composition in economic activity. Current account balance is expected to post a surplus in 2022 due to the strengthening of the upward trend in exports.

"Strengthening of the improvement trend in current account balance is important for price stability objective, and in that respect, developments in commercial and consumer loans are closely monitored.

Increase in inflation in November has been driven by developments in exchange rates and supply side factors such as the rise in global food and agricultural commodity prices, supply constraints, and demand developments. The Committee decided to complete the use of the limited room implied by transitory effects of supply-side factors and other factors beyond monetary policy's control on price increases and reduced the policy rate by 100 basis points.

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).

(HA/SD)

Central Bank cuts policy rate again, Turkish Lira plummets to new low

İstanbul

Central Bank's course of policy rate changes