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The decision was unveiled after the PPK meeting, which was shown as the first major test of the management of the new economy. The Central Bank raised the policy rate by 475 basis points from 10.25 percent to 15 percent. The dollar fell to 7.50 as an initial reaction.
The center decided to do all the financing at the one-week buyback rate, which is the main policy tool.
The following statements were made by the Monetary Policy Committee after the meeting:
The world economy partially recovered in the third quarter. However, due to the recent increase in Covid-19 cases, uncertainties regarding the global economy have increased in the next period.
The recovery of economic activity continues. The partial restrictions imposed by the increasing number of cases increase the uncertainty about the short-term prospects for economic activity, especially in the services sector. On the other hand, domestic demand, which increased with the lagged effects of the strong credit boost during the epidemic period, negatively affects the current account balance through the import channel.
THE RISE IN INFLATION IS TEMPORARY
The lagged effects of the depreciation of the Turkish lira, the rise in international food prices and the deterioration of inflation expectations negatively affect the inflation outlook. 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.
Governor of the Central Bank, Naci Ağbal / Photo: DepoPhotos
TIGHT SUPPORT WILL CONTINUE
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.
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 dollarization trend, increasing foreign exchange reserves and permanently reducing financing costs.
INTEREST RATE REPO SINGLE INDICATOR
The Central Bank will achieve its main objective of achieving and maintaining price stability by applying 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 are announced may cause the Board to change its political stance in the future.
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