Turkiye's TCMB ups interest rate to 42.5% from 40% to fight inflation

22 Dec '23

1 min read

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Insights

The Turkish central bank has raised the one-week repo auction rate from 40 per cent to 42.5 per cent.
The existing level of domestic demand, stickiness in services inflation and geopolitical risks keep inflation pressures alive.
Recent indicators suggest domestic demand continues to moderate as monetary tightening is reflected in financial conditions.

The monetary policy committee of the Turkish central bank (TCMB) recently raised the policy rate, i.e., the one-week repo auction rate, from 40 per cent to 42.5 per cent.

Headline inflation in the country rose in November and remains in line with the outlook presented in the most recent inflation report. The existing level of domestic demand, stickiness in services inflation and geopolitical risks keep inflation pressures alive, the central bank said in a release.

On the other hand, recent indicators suggest that domestic demand continues to moderate as monetary tightening is reflected in financial conditions.

The committee also assesses that inflation expectations and pricing behaviour started to show signs of improvement.

The notable improvement in external financing conditions, continued increase in foreign exchange reserves, positive impact of demand rebalancing on current account balance, and the accelerated increase in domestic and foreign demand for Turkish lira-denominated assets contribute significantly to exchange rate stability and the effectiveness of monetary policy.

In light of these developments, the decline in the underlying trend of monthly inflation continues, the bank’s release noted.

The monetary tightness will be maintained as long as needed to ensure sustained price stability, it added.

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