CBRT announced its September interest rate decision.
The CBRT Monetary Policy Committee increased interest rates to 30% with a 500 basis point increase in September.
It seems that the expectation for the CBRT's interest rate increase is 30%.
CBRT increased the rate to 25% with a 750 basis point interest rate increase in August.
What Was the Dollar's Reaction to the Interest Rate Decision?
As you may remember, in previous meetings it was stated that the low interest policy would be abandoned and interest rates would be increased.
At this point, while the CBRT continues to increase interest rates, the dollar is traded at 27 TL after the decision.
The text of the decision is as follows:
“The Monetary Policy Committee (Board) has decided to increase the one-week repo auction interest rate, which is the policy rate, from 25 percent to 30 percent.
The Board decided to continue the monetary tightening process in order to establish disinflation as soon as possible, anchor inflation expectations and control the deterioration in pricing behavior.
Inflation was above expectations in July and August. While the strong course of domestic demand and the rigidity in service prices continue, the increase in oil prices and the ongoing deterioration in inflation expectations create additional upward pressure on inflation. These factors indicate that inflation will remain close to the upper limit of the forecast range in the Inflation Report (Report) at the end of the year. It has been evaluated that the recently effective wage and exchange rate-based cost pressures and tax regulations have had a significant impact on inflation and that the main trend of monthly inflation will begin to decline. The Board is determined to establish disinflation in line with the path in the Report in 2024, with the effect of monetary tightening steps.
Direct foreign investments, improvement in external financing conditions, ongoing increase in reserves, support of tourism revenues to the current account and increasing domestic and international demand for Turkish lira assets will contribute strongly to price stability.
The policy rate will be determined to provide monetary and financial conditions that will reduce the main trend of inflation and reach the 5 percent target in the medium term. Monetary tightening will be gradually strengthened when and to the extent necessary until a significant improvement in the inflation outlook is achieved.
The Board is simplifying the existing micro- and macroprudential framework in a way that will increase the functionality of market mechanisms and strengthen macro-financial stability. The simplification process will continue gradually, taking into account impact analyses. In this context, regulations to increase the share of Turkish lira deposits strengthen the monetary transmission mechanism. In addition to increasing interest rates, the Board will continue to make selective credit and quantitative tightening decisions that will support the monetary tightening process.
Indicators regarding inflation and its main trend will be closely monitored and the Board will continue to use all the tools at its disposal with determination in line with the main goal of price stability.
The Board will continue to make its decisions in a predictable, data-driven and transparent framework.
Summary of the Monetary Policy Committee Meeting will be published within five business days.
*This is not investment advice.