Turkish Central Bank raises policy rate to 30%

    REGION  21 September 2023 - 17:22

    The Central Bank of Türkiye has raised the key discount rate by 500 basis points (bps) to 30 per cent from 25 per cent to 30 per cent.

    “The hike in the one-week repo auction rate was in line with market expectations. That came on top of the cumulative 1,650 bps increase in the policy rate in the previous three months, bringing the total hike to 2,150 bps since June,” Hurriyet Daily News reports.

    The Monetary Policy Committee decided to continue the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behaviour, the bank said in a statement.

    The policy rate will be determined in a way that will create monetary and financial conditions necessary to ensure a decline in the underlying trend of inflation and to reach the 5 per cent inflation target in the medium term, the bank said.

    “Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved,” the statement reads.

    “Given the monetary tightening stance, the committee is determined to establish the disinflation course in 2024.”

    To increase the functionality of market mechanisms and strengthen macro-financial stability, the committee continues to simplify and improve the existing micro- and macroprudential framework, it said.

    Guided by impact analyses, the simplification process will continue to be gradual, the bank reiterated.

    “In this context, recent regulations targeting a rising share of Turkish lira deposits strengthen the monetary transmission mechanism. In addition to the increase in the policy rate, the committee will continue to make decisions on quantitative tightening and selective credit tightening to support the monetary policy stance,” it added.

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