Turkish central bank raises policy rate from 8.5% to 15%

22 Jun '23

1 min read

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The policy rate was raised from 8.5 per cent to 15 per cent by the Turkish central bank today.
It will start the monetary tightening process to set in motion the path of disinflation, anchor inflation expectations and control the deteriorating pricing behaviour.
The deterioration in pricing behaviour is expected to put further pressure on inflation.

The Turkish central bank’s monetary policy committee (MPC) today raised the policy rate, i.e., the one-week repo auction rate, from 8.5 per cent to 15 per cent. It decided to begin the monetary tightening process to establish the disinflation course as soon as possible, anchor inflation expectations and control the deterioration in pricing behaviour, the bank said.

Recent indicators in Turkiye point to an increase in the underlying trend of inflation, and strong domestic demand, cost pressures and the stickiness of services inflation have been the main drivers, the bank noted in a release.

The committee anticipates that the deterioration in pricing behaviour will put further pressure on inflation.

The medium-term inflation target is 5 per cent. Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved, the bank said.

To raise the functionality of market mechanisms and strengthen macro financial stability, the committee will simplify and improve the existing micro- and macro-prudential framework.

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