Central Bank lowers key rate

ANKARA

In a surprising move, Türkiye’s Central Bank lowered its policy rate, the one-week repo auction rate, by 100 basis points from 14 percent to 13 percent.

Markets had widely expected the bank to keep its rate unchanged. The Central Bank cut the policy rate from 15 percent to 14 percent for the last time in December 2021.

“The committee expects the disinflation process to start on the back of measures taken and decisively implemented for strengthening sustainable price and financial stability along with the resolution of the ongoing regional conflict,” the Central Bank said in a statement issued following the Monetary Policy Committee meeting held on Aug. 18.

Additionally, leading indicators for the third quarter point to some loss of momentum in economic activity, it added.

The financial conditions remain supportive of preserving the growth momentum in industrial production and the positive trend in employment in a period of increasing uncertainties regarding global growth, as well as escalating geopolitical risk, the bank said.

“Accordingly, the committee decided to reduce the policy rate by 100 basis points, and has assessed that the updated level of the policy rate is adequate under the current outlook.”

To create an institutional basis for sustainable price stability, the comprehensive review of the policy framework continues with the aim of encouraging permanent and strengthened liraization in all policy tools, the bank said.

Credit, collateral and liquidity policy actions, of which the review process is finalized, will continue to be implemented to strengthen the effectiveness of the monetary policy transmission mechanism, it stressed.

The bank reiterated that it would continue to use all available instruments decisively within the framework of the 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.

“The committee will continue to take its decisions in a transparent, predictable and data-driven framework,” the statement added.