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The Monetary Policy Committee (MPC) of the Central Bank of the Republic of Turkey (CBRT) met today under the chairmanship of Ağbal Naci for the first time. As expected, the bank raised interest 4.75 points from 10.25 to 15. It announced that it would do all financing at the policy rate. So it went to simplify. Ağbal was appointed on November 7.
FOLLOW-UP IS LOW
After the central bank raised policy interest by 475 basis points, the dollar fell to 7.53 lire and the euro to 8.91 lire at first. This critical day started with the dollar at 7.72 and the euro at 9.15 liras, just before the interest rate decision, the dollar rose to 7.70 and the euro to 9.12.
INCREASE IN PARALLEL OF EXPECTATIONS
There was a strong expectation in the markets that there would be an increase in interest rates in recent weeks. The 27 economists who participated in the AA Finans MPC meeting market expectations survey predicted an increase in the policy rate (one-week buyback auction rate). The expectations of economists who expected an increase in the interest rate were between 200 and 550 basis points. The median of economists’ expectations for the monetary policy rate for November was 475 basis points.
ALL FUNDING HAS BEEN DECIDED TO MAKE A WEEKLY REPORT
In the statement made by the MPC, “The Monetary Policy Committee has decided to increase the policy rate, which is the one-week repurchase auction rate, from 10.25 percent to 15 percent. All financing must be done. on the one-week buyback rate, which is the main policy tool. ” ‘It was said.
It was noted in the text that the world economy partially recovered in the third quarter:
‘RESTRICTIONS DUE TO THE INCREASE IN THE NUMBER OF CASES INCREASES UNCERTAINTY’
However, due to the recent increase in Covid-19 cases, uncertainties regarding the global economy have increased in the next period. The recovery in economic activity continues. The partial restrictions imposed by the growing number of cases increase uncertainty about the short-term prospects for economic activity, especially in the services sector.
‘INCREASING THE NATIONAL DEMAND IS NEGATIVELY INFLUENCING THE BALANCE OF THE CURRENT ACCOUNTS WITH THE IMPORT CHANNEL’
On the other hand, domestic demand, which increased with the lagged effects of the strong credit impulse during the epidemic period, adversely affects the current account balance through the import channel. The lagged effects of the depreciation of the Turkish lira, the rise in international food prices and the deterioration in inflation expectations negatively affect the inflation outlook.
‘A LOW INFLATION ENVIRONMENT WILL CONTRIBUTE TO RISK BONUS THINKING’
Although the data monitored for November point to a recent increase in inflation due to exchange rate volatility, this increase is considered transitory with the determined monetary policy stance. Consequently, the Committee has decided to carry out a clear and strong monetary tightening in order to eliminate the risks related to the inflation outlook, control inflation expectations and restore the disinflation process as soon as possible. In the next period, the restrictive monetary stance will be maintained with determination, taking into account all the factors that affect inflation, until a permanent decrease in inflation is achieved.
‘THE STRENGTH OF THE MONETARY POSITION WILL BE CONTINUED WITH THE DETERMINATION’
It has been assessed that the permanent establishment of a low inflation environment will positively affect macroeconomic and financial stability by reducing country risk premiums, reversing the trend towards dollarization, increasing foreign exchange reserves and permanently reducing financing costs. The Central Bank will achieve its main objective of achieving and maintaining price stability through the application of the principles of transparency, predictability, and accountability required by the inflation targeting regime.
In light of these principles, Central Bank financing will be based on the one-week repo rate, which is the main policy tool, and this interest rate will be the only indicator of monetary orientation. It should be emphasized that any new data and news that is announced may cause the Board to change its political stance for the future. ”
In his first statement, the new president Ağbal declared that all political tools will be used decisively in line with the main objective of price stability.
had said.
President Recep Tayyip Erdogan said yesterday that the high cost of interest was clear and that the investor should not be crushed by the high interest rate.
