Turkish central bank publishes interest rate decision, talks about the future through Investing.com

Investing.com – released interest rate decision after several days of anticipation amid inflation recorded a few days ago, which came amid expectations.

The Turkish central bank has kept interest rates unchanged at 14%.

Turkish Federal Report

Geopolitical risks

Negative risks to global and regional economic activity are alive and well, leading to increased uncertainty. Growing uncertainties in global food security, along with trade sanctions, higher commodity prices, and in some sectors, especially basic food and energy, and higher transportation costs, are driving up the prices of manufacturers and consumers internationally.

Inflation expectations and the effects of higher global inflation on international financial markets are being closely watched, although central banks in developed countries view that inflation will take longer than expected due to higher energy prices and the mismatch between supply and demand.

Becomes even stronger

In this context, capacity utilization levels and other key indicators indicate that domestic economic activity remains strong, with the positive impact of gradually increasing external demand, despite regional differences.

As the role of fixed components in the formation of growth increases, the risks arising from energy prices persist in the current account balance, and it is important that the current account balance is always at a constant level for price stability.

Precautionary policy

The Board considers that the growth rate of loans, including long-term investment loans in the Turkish lira, and the meeting of financial resources approached with economic activity in line with their purpose are important for financial stability.

In this context, the Council will continue to implement the macro-Prudential Policy, which has been strengthened with further action.

Swelling

The cost of energy increases from the temporary effects of geopolitical developments, the absence of economics, and the strong negative supply shocks caused by rising global energy, food and agricultural prices.

The Council expects that with the measures taken to achieve sustainable prices and financial stability, the key effects of inflation will disappear and the process of reducing inflation will begin by re-establishing an environment of world peace.

In this context, the Board has decided to maintain a policy ratio that is consistent with the fact that in order to institutionalize price stability, the CBRT continues to review the comprehensive policy framework that promotes a permanent and strengthened lira on all policy instruments. The collateral and liquidity policy, with its ratings completed and implemented.

All tools

In line with the main objective of price stability, the Turkish central bank will continue to use all its tools resolutely within the framework of the lira strategy until strong signs of a permanent decline in inflation and a medium-term target emerge. 5%

The bank said the stabilization to be achieved at public price levels, the reduction of state risk premiums, the continuation of reverse currency exchange and the increase in foreign exchange reserves would positively affect macroeconomic stability and financial stability. Permanent reduction in financial costs.

Thus, a conducive environment for sustainable investment, productivity and employment development in a healthy and sustainable manner will be created and the Board will continue to take its decisions within a transparent, predictable and data-based framework.

Accordingly, the Monetary Policy Committee decided to keep the repurchase auction rate, i.e. the policy rate, at 14 per cent for one week.

Lira now

At this juncture, it is trading at its lowest level in 5 months, crossing the 16 pound / dollar mark for the first time since the last cut on December 21, 2021.

The Turkish lira fell 0.5% to 16.46 lira / dollar, down 1.5% on Wednesday.

On the other hand, in light of the expectations of investors in the mid-term, the Turkish lira is trading at 980 lira / g, while gold has risen within the range of 80 lira per gram from the beginning. Month.

Swelling

Official figures show that the consumer price index in Turkey rose by 70% in April compared to the same month last year, reaching its highest level in two decades.

On a monthly basis, prices rose, according to data from the Turkish Statistics Institute, while the consumer price index rose 7.25% in April compared to the previous month.

The Turkish lira fell sharply, peaking in December 2021, as President Recep Tayyip Erdogan prioritized exports over monetary stability after introducing a policy of lowering interest rates.

Erdogan described interest rates as the root of all evil, and used an unusual policy to reduce rates, including interference in the foreign exchange market.

The Turkish president has changed the leadership of the country’s central bank three times in the past two years, and the Turkish central bank has cut interest rates from 19 percent to 14 percent from September to December 2021.

The Turkish lira fell to its lowest level since December 21, when it fell below 18 lira / dollar.