The central bank’s announcement of its decision on the interest rate on the Turkish lira came against expectations, as the Turkish central bank left the interest rate at 10.25 percent.
“It was decided to increase flexibility in managing liquidity and to continue liquidity measures until a significant improvement in inflation expectations is achieved,” the central statement said.
Despite expectations of an increase in the interest rate, the central bank left the interest rate at 10.25 percent.
Expectations of an interest rate increase ranged between one and three points, while the average estimate was 1.75 points.
The central bank raised the delayed liquidity window rate from 13.25 percent to 14.75 percent.
The Turkish central bank also raised the interest rate in its policy for the first time last month after September 2018 from 8.25 percent to 10.25 percent.
The recovery in economic activity continues
In the statement of the Monetary Policy Committee at the Central Bank, the following:
“In the global economy, with the normalization steps taken by the countries, uncertainty about the recovery in the third quarter was noted, and although there are signs of a partial recovery. The developed and developing countries maintain their expansionary monetary and fiscal position. The effects are closely monitored.”
The recovery in economic activity continues. With recent policy steps being taken, the trend of normalization in commercial and retail loans becomes more evident. With the gradual withdrawal of supportive policies implemented within the scope of epidemiological measures.
It appears that the expected balance in imports has started a strong recovery in commodity exports, and the relatively low levels of commodity prices and the real exchange rate will support the current account balance in the coming period.
As a result of the rapid recovery achieved in the economy along with the strong credit momentum and developments in the financial markets, inflation followed a higher than expected path.
With the steps taken in the scope of monetary policy and liquidity management to control inflation expectations and reduce risks to inflation expectations, significant tightening of financial conditions has been achieved.
Accordingly, the committee decided to increase flexibility in managing liquidity and maintain liquidity measures until a significant improvement in inflation expectations is achieved, while keeping the policy rate constant.
The cautious stance will continue
The committee believes that the resumption of the process of curbing inflation is of great importance due to the reduction of the country risk premium, the reduction of long-term interest rates, and the promotion of recovery in the economy.
The cautious monetary policy stance must be maintained in order for lower inflation to occur in line with the target path.
In this context, the monetary position will be determined in a way that ensures continued low inflation, taking into account the basic trend indicators.
The Turkish central bank will continue to use all the tools available to it for the purposes of price and financial stability.
It should be noted that any new data and news that will be announced may push the Board of Directors to change its policy stance in the future.