Türkiye Cumhuriyet Merkez Bankası (TCMB), Turkey’s central bank, Monetary Policy Committee (PPK), under the chairmanship of Fatih Karahan, kept the policy rate unchanged at 37% at its meeting. The overnight lending rate was maintained at 40% and the borrowing rate at 35.5%. The announcement stated that the underlying trend of inflation had declined despite monthly fluctuations and that weak domestic demand had been confirmed. It noted that high energy prices stemming from geopolitical developments posed an upside risk to the inflation outlook. The Committee said that the tight stance would be maintained until price stability was achieved, and that decisions would be taken on a meeting-by-meeting basis, cautiously and in a data-driven manner, in line with inflation realizations and expectations. In the event of a persistent deterioration, tightening measures will be taken and macroprudential steps will be implemented if necessary. Liquidity will be monitored; the meeting summary will be published within five business days. The policy will provide the conditions needed to bring inflation to the 5% target over the medium term.
Why it matters
The main outcome of the decision was the preservation of the current tightness in monetary policy and the absence of a signal of new easing in the short term. This framework shows that the risk posed by energy prices represents a decisive counterweight to the decline in the underlying trend of inflation and weak domestic demand. The Committee’s statement that it would take steps on a meeting-by-meeting basis in line with realizations and expectations indicates that subsequent decisions will remain dependent on changes in economic data. Therefore, the issues to be monitored are the extent to which the tight stance will be maintained, whether energy costs will disrupt the inflation outlook, and which macroprudential steps will be implemented in the event of a persistent deterioration; the meeting summary will set out the rationale behind this approach in greater detail.
Term: inflation
Inflation is the continuous increase in the general level of prices and the decline in the purchasing power of money.