The CBRT announced its interest rate decision for August.
The CBRT Monetary Policy Committee increased the interest rates to 25% with a 750 basis points increase in August.
It is seen that the expectation for the CBRT's interest rate hike is 20%.
The CBRT raised the rate to 17.5% with a 250 basis point rate hike in July.
What Was The Reaction Of The Dollar To The Interest Rate Decision?
As it will be remembered, it was stated in the previous meetings that the low interest policy would be abandoned and interest rates would be increased.
At this point, while the CBRT continued to increase interest rates, the reaction of the dollar after the decision was as follows. The dollar fell to the level of 26.5.
The text of the decision is as follows:
“The Monetary Policy Committee (the Board) has decided to increase the one-week repo auction rate, which is the policy rate, from 17.5 percent to 25 percent.
The Board decided to continue the monetary tightening process in order to establish disinflation as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior.
Recent indicators point out that the underlying trend of inflation continues to rise. The strong course in domestic demand, cost pressures stemming from wages and exchange rates, rigidity in services inflation and tax regulations are determinants of this development. In addition to these factors, the deterioration in inflation expectations and pricing behavior, which is more than anticipated due to the rise in fuel prices, indicates that inflation will remain close to the upper limit of the forecast range in the Inflation Report (Report) at the end of the year. However, the Board anticipates that disinflation will be established in 2024 in line with the Report, with the effect of monetary tightening steps.
Foreign direct investments, the improvement in external financing conditions, the ongoing increase in reserves and the support of tourism revenues to the current account will contribute strongly to price stability.
The policy rate will be determined in a way that will reduce the underlying trend of inflation and provide the monetary and financial conditions that will bring inflation to the 5 percent target in the medium term. Monetary tightening will be gradually strengthened as and when 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 the impact analysis. In this context, regulations to increase the share of Turkish lira deposits will strengthen the monetary transmission mechanism. In addition to interest rate hikes, the Board will continue to take selective credit and quantitative tightening decisions that will support the monetary tightening process.
Indicators regarding inflation and the underlying trend of inflation will be closely monitored, and the Board will continue to use all instruments resolutely in line with its main objective of price stability.
The Board will continue to take its decisions in a predictable, data-driven and transparent framework.”
*Not investment advice.