The Central Bank Monetary Policy Committee (PPK) announced the first interest rate decision of the year. Accordingly, MPC kept the one-week repo auction rate, which is the policy rate, at 9 percent.
After the 150 basis point cut in November, the MPC passed December as well.
While it was stated in the decision text of December that the current policy rate was considered sufficient, there was no similar statement in the text of today’s decision. Some market participants interpreted the removal of this sentence as a sign of further rate cuts.
‘THE DATA IS POSITIVE THAN EXPECTED’
In the decision text published today by the MPC, it was stated that although the data on economic activity in the recent period were realized at more positive levels than expected, recession concerns in the economies of developed countries continued with the effect of geopolitical risks and interest rate hikes.
In the text, it was stated that the negative effects of supply constraints in some sectors, especially in basic food, were reduced thanks to the strategic solution tools developed by Turkey, but the high levels of producer and consumer inflation continued on an international scale.
The MPC stated that the effects of high global inflation on inflation expectations and international financial markets were closely monitored and made the following assessment:
“Due to the differing economic outlook between countries, the divergence in the monetary policy steps and communications of central banks of developed countries continues. It is observed that efforts to find solutions with new supportive practices and tools developed by central banks for increasing uncertainties in financial markets continue. In addition, financial markets continue to provide interest rates against increasing recession risks. It has started to reflect the expectations that the central banks, which increase the interest rate, will soon end their interest rate increase cycles.
Emphasis on CURRENT ACCOUNT BALANCE
“There was a strong growth in the first three quarters of 2022. Indicators for the last quarter of the year indicate that the slowdown in growth due to the weakening foreign demand is compensated by the relatively strong course in domestic demand. The effects of external demand-driven pressures on the manufacturing industry on domestic demand and supply capacity. For now, it is seen that it remains at a limited level. While the share of sustainable components in the composition of growth is increasing, the strong contribution of tourism to the current account balance, which exceeds expectations, continues to spread to all months of the year. In addition, the domestic consumption demand, high level of energy prices and the possibility of a recession in the main export markets pose risks on the current account balance. It is important for price stability that the current account balance becomes permanent at sustainable levels.”
‘IMPROVEMENT HAS BEEN SEEN IN THE INFLATION LEVEL’
In the text of the resolution, it was also emphasized that the level and trend of inflation started to improve with the support of holistic policies implemented to strengthen sustainable price stability and financial stability.
In the resolution text, which stated that the effects of the decreasing foreign demand on total demand conditions and production were closely monitored, “In a period when uncertainties regarding global growth and geopolitical risks increased, financial conditions should be supportive in terms of the continuation of the structural gains in supply and investment capacity, as well as the continuation of the acceleration in industrial production and the increasing trend in employment. “In this context, the Board has decided to keep the policy rate constant.”
It was stated that the CBRT will implement the Liraization Strategy with all its elements in order to institutionalize price stability in a permanent and sustainable way.