Turkey's central bank raised the country's key rate from 8.5 to 15% as part of measures to combat the economic crisis and tighten monetary policy. The decision was published on Thursday on the central bank website following a meeting of the bank's monetary policy committee.
The matter concerns the rate at weekly repo auctions - a short-term loan of funds against securities. This is the key index of Turkey's central bank. The rate increase was the first since March 2021.
"The committee decided to increase the weekly repo auction rate from 8.5 to 15%. The central bank's board decided to start tightening monetary policy in order to achieve deflation as soon as possible, anchor inflation expectations and control price volatility," the central bank said in a statement.
The committee met for the first time under the leadership of new Central Bank Governor Hafize Gaye Erkan, previously appointed by President Tayyip Erdogan, who favors lower interest rates. The bank's management notes that in the future the key rate "will be determined in such a way as to create monetary and financial conditions that will ensure the underlying trend of inflation to decrease and achieve the target level of 5% in the medium term." The bank also drew attention to the trend of global inflation declining but still exceeding long-term rates, and central banks in other countries are raising rates.
"Monetary policy tightening [in Turkey] will gradually increase as necessary until there is a significant improvement in the inflation outlook. The central bank will continue to vigorously use all instruments at its disposal in line with the primary objective of price stability. The effectiveness of monetary policy will improve as it begins to tighten," the regulator's management said in its decision.
The Turkish central bank also promises to "simplify micro- and macroprudential measures to make market mechanisms more functional and strengthen macro-financial stability." This process will be implemented step by step.
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Based on materials from TASS