Central Bank keeps policy rate stable at 9 percent

ANKARA

The Turkish Central Bank on Dec. 22 held its policy rate at 9 percent, ending a four-month interest-rate cutting cycle despite a surge in inflation.

The bank has reduced interest rates by 500 basis points from August to November.

“Considering the increasing risks regarding global demand, the committee evaluated that the current policy rate is adequate,” the bank said in a statement following the year’s last Monetary Policy Committee (MPC).

Türkiye’s inflation stood at 84.4 percent in November, down from an 85.5 percent rise in October, posting the first fall in the annual inflation rate since May 2021.

“The high level of energy prices and the likelihood of a recession in main trade partners keep the risks on current account balance alive,” the bank said.

“Sustainable current account balance is important for price stability. The rate of credit growth and allocation of funds for real economic activity purposes are closely monitored.”

The bank will “continue to decisively use the tools supporting the effectiveness of the monetary transmission mechanism and the entire policy toolset, particularly funding channels, will be aligned with liraization targets,” the statement added.

“The credit, collateral and liquidity policy actions will continue to be implemented to strengthen the effectiveness of the monetary policy transmission mechanism,” the Central Bank said.

“The bank will continue to use all available instruments decisively within the framework of liraization strategy until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is achieved in pursuit of the primary objective of price stability,” it said.

“Stability in the general price level will foster macroeconomic stability and financial stability through the fall in country risk premium, continuation of the reversal in currency substitution and the upward trend in foreign exchange reserves, and durable decline in financing costs.”