SHAFAQNA TURKEY. The statement of the Central Bank of the Russian Federation on interest rates indicated that the meeting of the Council, chaired by the President of the Central Bank Shahap Kavcioglu, decided to reduce the discount rate from 10.5 to 9 percent.
The announcement included the following statements:
“The upward trend in producer and consumer prices continues”
The weakening effect of geopolitical risks on economic activity around the world continues to intensify. Global growth forecasts for the coming period continue to be updated downwards, and assessments that a recession is an inevitable risk factor are gaining ground.
Although the negative effects of supply restrictions in some sectors, especially in basic foodstuffs, have been reduced thanks to the policy decision tools developed by Turkey, the upward trend in producer and consumer prices continues internationally. The implications of high global inflation for inflation expectations and international financial markets are being carefully monitored. However, central banks in developed countries are stressing that inflation may take longer than expected due to high energy prices, supply-demand mismatches and tight labor markets.
Depending on the economic outlook, which differs between countries, the divergence in the steps of monetary policy and communications of the central banks of developed countries continues to widen. It was noted that efforts to find solutions using new supporting practices and tools developed by central banks to increase uncertainty in financial markets continue.
“Employment growth is more positive compared to peer economies”
Strong growth occurred in the first half of 2022. On the other hand, leading indicators for the second half of the year indicate that the slowdown in growth continues due to weakening external demand. However, the limited impact of external demand pressure on manufacturing on domestic demand and supply potential is becoming increasingly clear.
Employment growth is more positive than in comparable countries. When looking at employment generating sectors, it can be seen that the growth momentum is supported by structural advantages.
While the share of sustainable components in growth has increased, tourism’s strong, above-expected contribution to the current account balance remains. In addition, strong energy prices and the possibility of a recession 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.
In addition, the balance achieved by the interest rate gap on political loans, which has increased significantly in recent times thanks to the announced macroprudential measures, is carefully monitored. The Board will resolutely continue to use its tools to support the effectiveness of the monetary transmission mechanism and will take further action. The policies to be implemented will be announced in detail in the Monetary and Exchange Rate Policy for 2023, which will be announced in December.
“The Board of Directors has decided to complete the cycle of interest rate cuts”
In growth there is inflation; The lagged and indirect effects of rising energy costs due to geopolitical events, the effects of pricing outside economic fundamentals, and strong negative supply shocks caused by rising global prices for energy, food and agricultural commodities continue to have an impact.
The Council foresees that the process of disinflation will begin with the restoration of global peace, as well as with steps taken and strongly implemented to strengthen sustainable price stability and financial stability. The effects of lower external demand on aggregate demand and production conditions are being carefully monitored.
At a time of increasing uncertainty about global growth and geopolitical risks, it is imperative that financial conditions are supportive in terms of sustaining the acceleration in industrial production and employment growth, as well as the sustainability of structural supply growth and investment potential.
As a result, the Committee decided to cut the discount rate by 150 basis points. The Board assessed that the current discount rate is at a sufficient level, given the growing risks associated with global demand, and decided to complete the cycle of interest rate cuts that began in August. To institutionalize price stability on a sustainable basis, the CBRT continues to review a comprehensive policy framework that encourages continued and enhanced liberalization across all policy instruments. The credit, collateral and liquidity policies that have already been assessed will continue to be used to improve the effectiveness of the monetary policy transmission mechanism.
In line with its primary goal of price stability, the CBR will resolutely continue to use all the tools at its disposal as part of its liraization strategy until there are strong indicators pointing to a permanent decline in inflation and a medium-term target of 5 percent. Achieved. 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.
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