Central Bank raises interest rates by 500 basis points

The Central Bank has raised interest rates for the fifth time in its new period.

The Monetary Policy Committee (PPK), consisting of Dr. Hafize Gaye Erkan, Dr. Osman Cevdet Akçay, Prof. Dr. Elif Haykır Hobikoğlu, Dr. Fatih Karahan, and Prof. Dr. Hatice Karahan, increased the policy rate, which is the one-week repo auction interest rate, by 5 percentage points, raising it from 30% to 35%.

The Committee also decided "to continue the monetary tightening process to establish disinflation as soon as possible, anchor inflation expectations, and control disturbances in pricing behavior."

The Committee, noting that inflation exceeded the forecast in the third quarter of the year, stated the below in today's interest rate decision:

In the third quarter, inflation readings were above expectations. The pass-through from tax regulations and cost pressures stemming from wages and exchange rates, which have been recently impactful, has been largely completed. The strong course of domestic demand, the stickiness of services inflation, and the deterioration in inflation expectations continue to put upward pressure on inflation. In this framework, while the year-end inflation is projected to be close to the upper bound of the forecast range provided in the Inflation Report (Report), it is also evaluated that the underlying trend in monthly inflation is on course to decline. On the other hand, geopolitical developments pose risks to the inflation outlook due to oil prices. Through the monetary tightening process, the Committee is determined to establish the disinflation course in 2024 in line with the Report.

Foreign direct investment, stable course of external financing conditions, continued increase in foreign exchange reserves, the positive impact of rebalancing in demand on current account balance, and the increase in domestic and foreign demand for Turkish lira denominated assets will significantly contribute to price stability.

The policy rate will be determined in a way that will create monetary and financial conditions necessary to ensure a decline in the underlying trend of inflation and to reach the 5 percent inflation target in the medium term. Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in inflation outlook is achieved.

To increase the functionality of market mechanisms and strengthen macro financial stability, the Committee continues to simplify and improve the existing micro- and macroprudential framework. Guided by impact analyses, the simplification process is advancing gradually. In this context, monetary transmission mechanism will be further strengthened by taking additional steps to increase the share of Turkish lira deposits. In addition to the increase in the policy rate, the Committee will continue to make decisions on quantitative tightening and selective credit tightening to support the monetary policy stance.

The interest rates implemented by the Central Bank in different periods:

During Murat Çetinkaya's term, who was removed from office on July 6, 2019, and replaced by Murat Uysal:

In July 2019, it was reduced from 24% to 19.75%.
In September 2019, it was further reduced from 19.75% to 16.50%.
In October 2019, it went down from 16.50% to 14%.
In December 2019, it decreased from 14% to 12%.
In January 2020, it was lowered from 12% to 11.25%.
In February 2020, it saw another reduction from 11.25% to 10.75%.
In March 2020, it was reduced from 10.75% to 9.75%.
In April 2020, it decreased from 9.75% to 8.75%.
In May 2020, it was adjusted from 8.75% to 8.25%.
In September 2020, it increased from 8.25% to 10.25%.
In October 2020, it further increased from 10.25% to 15%.

During the period when Murat Uysal was removed from office on November 7, 2020, and Naci Ağbal was appointed:

In December 2020, it increased from 15% to 17%.
In March 2021, it was further increased from 17% to 19%.

During Naci Ağbal's term, who was removed from office on March 20, 2021, and replaced by Şahap Kavcıoğlu:

In September 2021, it was reduced from 19% to 18%.
In October 2021, it was further reduced from 18% to 16%.
In November 2021, it went down from 16% to 15%.
In December 2021, it was reduced from 15% to 14%.
In August 2022, it decreased from 14% to 13%.
In September 2022, it was further reduced from 13% to 12%.
In October 2022, it decreased from 12% to 10.5%.
In November 2022, it saw another reduction from 10.5% to 9%.
In February 2023, it was further reduced from 9% to 8.50%.

During the period when Şahap Kavcıoğlu was removed from office on June 9, 2023, and Hafize Gaye Erkan was appointed:

In June 2023, it increased from 8.50% to 15%.
In July 2023, it was further increased from 15% to 17.50%.
In August 2023, it saw another increase from 17.50% to 25%.
In September 2023, it was further increased from 25% to 30%.

*There was no change in interest rates during the months not listed.

(VC/HA/PE)

Central Bank raises interest rates by 500 basis points

BIA News Desk

The interest rates implemented by the Central Bank in different periods: