Ankara: The Central Bank of the Republic of Turkiye (TCMB) announced on Thursday that it will lower its policy rate by 100 basis points from 40.5 percent to 39.5 percent on one-week repurchase (repo) operations.
According to Kuwait News Agency, the bank noted that the underlying trend of inflation increased in September. While recent data indicated that demand conditions were at disinflationary levels, they also highlighted a slowdown in the disinflation process. The Central Bank stated that recent price developments, particularly in food, posed risks to the disinflation process through inflation expectations and pricing behavior.
The Central Bank emphasized that the tight monetary policy stance would continue until price stability is achieved. This stance is intended to strengthen the disinflation process through demand, exchange rate, and expectation channels. The bank assured that it would ensure the necessary tightness along the projected disinflation path by setting the policy rate based on realized and expected inflation as well as its underlying trend.
In its statement, the Monetary Policy Committee expressed its commitment to creating the monetary and financial conditions needed to reach a 5 percent inflation target in the medium term. Turkiye’s annual inflation rate in September rose to 33.29 percent from 32.95 percent in August, exceeding market expectations.
The Central Bank’s decision follows a series of adjustments to its policy rate over recent months. From May 2023 until last March, the bank increased the rate from 8.5 percent to 50 percent, maintaining it until a meeting last December when the rate was lowered by 250 basis points to 47.5 percent. Subsequent meetings saw further cuts, with the benchmark rate reduced from 50 percent to 42.5 percent by March. A surprising hike of 350 basis points to 46 percent occurred in April, followed by a reduction to 43 percent in July and to 40.5 percent in August, surpassing estimates.