Turkish Central Bank set to meet for interest rate

ANKARA

Members of the Central Bank’s Monetary Policy Committee (MPC) will meet this week to decide on the key interest rates, as the decision is due on April 27.

Last month, the bank kept the policy rate (one-week repo auction rate) unchanged at 8.5 percent.

“The committee assessed that the current monetary policy stance is adequate to support the necessary recovery in the aftermath of the earthquake by maintaining price stability and financial stability,” the bank said in a statement released after the MPC’s March 23 meeting. Some economists expect the Central Bank to keep the rates constant at its meeting this week. 

In his speech on April 21 in Istanbul, President Recep Tayyip Erdoğan said both interest rate and inflation would decline.
Interest rates will not increase but fall as long as he is in power, Erdoğan said.

“They [interest rates] may increase in the U.S. and Europe, but interest rates in Türkiye will fall. And you will see that as interest rates fall, so will inflation,” he added.

Consecutive rate cuts

Türkiye’s Central Bank has gradually slashed its policy rate to 8.5 percent from 19 percent since 2021.

While the level and underlying trend of inflation have been improved, with the support of the implemented integrated policy approach, the effect of earthquake-driven supply-demand imbalances on inflation is being closely monitored, the bank said last month.

“It has become even more important to keep financial conditions supportive to preserve the growth momentum in industrial production and the positive trend in employment after the earthquake,” it added.

Besides the Central Bank’s rate decision, the markets will also keep an eye on several key macroeconomic data to be released this week.

On April 24, the Central Bank will release the figures for the capacity utilization rate for the manufacturing industry.

The capacity usage declined from 75.7 percent in February to 74.2 percent in March, the bank reported last month.

The bank will also unveil the real sector confidence index on April 24, which advanced by 1.7 points in March compared with the previous month to 104.1.

The economic confidence index for April will be released by the Turkish Statistical Institute (TÜİK) on April 27.

The statistics authority is also scheduled to release the foreign trade data or March and tourism data for the first quarter of 2023 on April 28.