The Central Bank of the Republic of Turkey (CBRT) announced its highly anticipated August interest rate decision. The decision did not come in line with the expectations, the policy rate was reduced to 13 percent.
A surprise interest rate cut came from the Central Bank, which held its eighth meeting of the year. With the MPK Decision dated August 18, 2022, the one-week repo auction rate was reduced by 100 basis points. After the decision, the Dollar/TL rate tested above 18.13.
18 Ağustos 2022 Tarihli PPK Kararı: 1 hafta vadeli repo ihale faiz oranı 100 baz puan indirildi. pic.twitter.com/oC3DwfjEAh
— Merkez Bankası (@Merkez_Bankasi) August 18, 2022
CBRT, August 2022 Interest Rate Decision: Reduced to 13 Percent
Economists had predicted that the interest rate would be kept constant at 14 percent at the Central Bank Monetary Policy Committee (PPK) meeting in July. The decision was contrary to expectations and the interest rate was reduced to 13 percent.
The highlights of the press release regarding the CBRT interest rates are as follows:
“In the rise in inflation; The lagged and indirect effects of energy cost increases caused by geopolitical developments, the effects of pricing formations away from economic fundamentals, and strong negative supply shocks caused by increases in global energy, food and agricultural commodity prices continue to be influential. The Board foresees that the disinflationary process will begin with the re-establishment of the global peace environment, together with the steps taken and determinedly implemented to strengthen sustainable price stability and financial stability. However, leading indicators for the third quarter point to a slight loss of momentum in economic activity. In a period when uncertainties regarding global growth and geopolitical risks increase, it is important that financial conditions are supportive in terms of sustaining the acceleration in industrial production and the increasing trend in employment. In this framework, the Board decided to decrease the policy rate by 100 basis points and evaluated that the updated policy rate is sufficient under the current outlook. In order to institutionalize price stability in a sustainable way, the CBRT continues to review a comprehensive policy framework that encourages permanent and strengthened liraization in all policy instruments. Credit, collateral and liquidity policy steps, whose evaluation processes have been completed, will continue to be used to strengthen the effectiveness of the monetary policy transmission mechanism.
