The Central Bank of the Republic of Turkey (CBRT) announced on Thursday that it raised its policy (one-week repo) rate by 200 basis points to 19%. Analysts’ expectation was for a 100 basis points increase to 18%.
Market reaction
With the initial market reaction, the USD/TRY came under strong bearish pressure and was last seen losing 2% on a daily basis at 7.3500.
Key takeaways from policy statement as summarized by Reuters
“Economic activity is on a strong course.”
“Rise in import prices affect the current account balance negatively.”
“Exchange rate effect impacting inflation outlook.”
“Commodity prices impact inflation outlook adversely.”
“Projected gradual waning in demand and cost factors is being delayed by the recent upward trend in credit growth and an increase in import costs.”
“Decided to deliver front-loaded and strong tightening considering upside risk to inflation.”
“Tight policy to be maintained decisively for extended period.”
“Additional monetary tightening will be delivered if needed.”
“Tight policy sustained decisively to maintain a strong disinflationary effect.”
“Inflation expectations will continue to be monitored closely for their compatibility with the targets.”
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