Turkey’s Central Bank keeps interest rate unchanged

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The Central Bank of the Republic of Turkey Monetary Policy Committee convened today (April 15) and has decided to keep the policy rate (one-week repo auction rate) unchanged at 19 percent.

Chaired by Central Bank Governor Şahap Kavcıoğlu, the Monetary Policy Committee (MPC) has released a statement after its meeting.

"Demand and cost factors, supply constraints in some sectors, and high levels of inflation expectations continue to pose risks to the pricing behavior and inflation outlook," the bank said in a statement.

As reported by the state-run Anadolu Agency (AA), the Committee added that the decelerating impact of the current monetary stance on credit and domestic demand is projected to become more significant in the upcoming period. In light of this, the committee decided to maintain a tight monetary policy stance by keeping the policy rate unchanged.

The bank also stressed that it will continue to decisively use all available instruments to ensure the primary objective of price stability. "The policy rate will continue to be determined at a level above inflation to maintain a strong disinflationary effect until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is reached," it said.

The course of interest rates in Turkey

After Central Bank Governor Murat Çetinkaya was removed from office and Murat Uysal was appointed in his place, the Monetary Policy Committee took its first decision of interest rate cut in July 2019 and cut the policy rate from its current level of 24 percent to 19.75 percent.

After its meeting on September 12, 2019, the Monetary Policy Committee of the Central Bank lowered the policy rate to 16.50 percent. The Committee reduced the interest rate to 14 percent on October 24, to 12 percent on December 12 and to 11.25 percent on January 16, 2020.

On February 19, the Central Bank decreased the policy interest rate from 11.25 percent to 10.75 percent. In the meeting on March 17, the policy interest rate was reduced from 10.75 to 9.75 percent.

In its meeting on April 22, the Bank decreased the policy interest rate from 9.75 to 8.75 percent. On May 21, the interest rate was further reduced to 8.25 percent. The Bank kept this rate unchanged in June, July and August.

In its September meeting, the Monetary Policy Committee of the Central Bank decided to increase the policy rate (one-week repo auction rate) from 8.25 to 10.25 percent. The interest rate was kept constant on October 22.

On November 7, 2020, Naci Ağbal was appointed as the new Governor of the Central Bank of Turkey by a Presidential decree.

The Central Bank announced an interest rate hike, raising the policy rate from 15 to 17 percent in December 2020. It kept the policy rate (one-week repo auction rate) constant at 17 percent in January 2021.

At the meeting on March 18, the policy rate was increased from 17 to 19 percent. Following this move, Central Bank Governor Naci Ağbal was dismissed by a Presidential decision and replaced by Şahap Kavcıoğlu. (HA/SD)