The Central Bank decided on the interest rate

SAFAKNA TURKEY – The Central Bank Committee on Monetary Policy announced the discount rate. The central bank cut its discount rate by 50 basis points to 8.5% in February.

The following provisions were included in the decision:

“Despite the fact that recently released data on economic activity turned out to be more positive than expected, fears of a recession with the effect of geopolitical risks and higher interest rates remain in the developed economies, and conditions are emerging that threaten financial stability. . Despite the negative effects of supply restrictions in some sectors, especially in basic foodstuffs, thanks to the strategic decision tools developed by Turkey, international producer and consumer inflation continues to be high. The implications of high global inflation for inflation expectations and international financial markets are being carefully monitored. While divergences in monetary policy moves and messages from developed country central banks persist due to differences in economic outlook between countries, coordinated steps are being taken to prioritize financial stability through swap agreements and new liquidity opportunities. Financial markets are reflecting expectations that central banks will soon end rate hike cycles.

Leading indicators before the catastrophe of the century indicated that in the first quarter of 2023, domestic demand was stronger than external demand, and the growth trend was upward. The effects of the earthquake on production, consumption, employment and expectations are assessed comprehensively. While the earthquake is expected to impact economic activity in the near term, it is not expected to have a permanent impact on the performance of the Turkish economy over the medium term. While the share of sustainable components in growth is high, the strong contribution of tourism to the current account balance, which exceeds expectations, continues to pervade all months of the year. In addition, domestic consumer demand, high energy prices and weak economic activity in major export markets remain current account risks. For price stability, it is important that the current account balance become constant at a sustainable level. The growth rates of loans and the development of financial resources achieved by economic activity in accordance with its purpose are carefully monitored. As outlined in the 2023 Monetary Policy and Liraization Strategy, the Board of Directors will resolutely continue to use instruments that will support the effectiveness of the monetary transfer mechanism and align the entire set of policy instruments, especially funding channels, with the goals of liraization. The Council will prioritize the creation of appropriate financial conditions to minimize the impact of the disaster and support the necessary transformation.

With the support of a comprehensive policy, improvements in the level and trend of inflation have begun to be seen, but the impact of the earthquake-induced supply/demand imbalance on inflation is closely monitored. Supporting financial conditions has become even more important since the earthquake in terms of sustaining industrial growth and increasing employment. In this regard, the Council decided to keep the discount rate unchanged. The Committee believes that the monetary policy stance is sufficient to support the necessary post-earthquake recovery by maintaining price and financial stability. The effects of the earthquake in the first half of 2023 will be closely monitored.

In line with its primary goal of price stability, the CBR will resolutely continue to use all the tools at its disposal until strong indicators emerge that point to a permanent decline in inflation and the medium-term target of 5 percent is reached. The CBRT will implement the Liraization Strategy with all its elements in order to institutionalize price stability on a permanent and sustainable basis. The resulting stability in the overall price level will positively impact macroeconomic stability and financial stability through lower country risk premiums, continued reverse currency substitution and an upward trend in foreign exchange reserves, and a continued decline in financing costs. In this way, a suitable basis will be created for continued growth in investment, production and employment in a healthy and sustainable manner.

The Council will continue to make its decisions in a transparent, predictable and data-driven environment.

The results of the meeting of the Monetary Policy Committee will be published within five business days.”

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