The Central Bank of the Republic of Türkiye (CBRT) held its policy rate, the one-week repo auction rate, at 45% on 22 February 2024, pausing a tightening cycle at the first Monetary Policy Committee meeting under Governor Fatih Karahan.
The decision was the first hold since May 2023. The bank had raised the rate by 250 basis points to 45% on 25 January 2024, its eighth consecutive increase, bringing cumulative tightening in the cycle to 3,650 basis points. Karahan, a former deputy governor who previously spent around a decade at the Federal Reserve Bank of New York, took over after Hafize Gaye Erkan resigned earlier in February.
INFLATION PRESSURES PERSIST
Annual consumer price inflation rose to 64.86% in January 2024, with prices up 6.7% on the month, the largest monthly increase since August 2023, led by services.
In its statement, the committee said the underlying trend of monthly inflation had risen in January in line with its projections, reflecting month-specific and time-dependent price and wage adjustments, and that headline inflation had edged up. It said recent indicators suggested domestic demand continued to moderate, but that stickiness in services inflation, geopolitical risks and food prices kept inflation pressures alive.
GUIDANCE ON TIGHT POLICY
The CBRT said the current level of the policy rate would be maintained until there was a significant and sustained decline in the underlying trend of monthly inflation and until inflation expectations converged to its projected forecast range. It added that monetary policy would be tightened if a significant and persistent deterioration in the inflation outlook was anticipated.
The committee said external financing conditions, foreign exchange reserves, an improving current account balance and demand for Turkish lira assets continued to support exchange rate stability and the effectiveness of monetary policy.