Turkiye's central bank raises policy rate to 30% to control inflation

22 Sep '23

1 min read

Pic: MDart10 / Shutterstock.com

Insights

The Monetary Policy Committee of Turkiye's central bank has raised the policy rate from 25 to 30 per cent to curb soaring inflation rates.
The decision aims to steer the country towards a disinflationary path by 2024.
Contributing factors to inflation include rising oil prices and strong domestic demand.
FDI is expected to positively impact price stability.

The Monetary Policy Committee of the Central Bank of the Republic of Turkiye announced a significant hike in the policy rate from 25 to 30 per cent. The decision aims to establish a disinflationary course and control inflation, which has exceeded expectations in July and August.

The Committee highlighted that it remains committed to achieving price stability and anchoring inflation expectations. Factors such as oil price hikes, increasing domestic demand, and unstable inflation expectations have contributed to the upward pressure on inflation rates. The Committee is determined to commence a disinflationary trajectory by 2024, in line with the projections of their Inflation Report, it said in a statement.

The Committee also noted that foreign direct investments and robust tourism revenues are expected to contribute positively to price stability. It emphasised that monetary tightening would continue to be adjusted until a significant improvement in the inflation outlook is observed.

Moreover, the Committee is implementing reforms to streamline micro- and macroprudential frameworks, intending to enhance market functionality and financial stability. They will also keep a close eye on inflation indicators and are committed to acting decisively to maintain price stability.

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