Türkiye: CBRT cuts policy rate by 100 basis points to 13%

The Central Bank of the Republic of Türkiye (CBRT) lowered its benchmark interest rate, the one-week repo rate, by 100 basis points to 13% from 14%.

Market reaction

With the initial market reaction, USD/TRY jumped to a multi-month high of 18.15 before retreating toward 18.10.

Key takeaways from policy statement

"Increase in inflation is driven by the lagged and indirect effects of rising energy costs resulting from geopolitical developments."

"Expecting disinflation process to start."

"It is important that financial conditions remain supportive to preserve the growth momentum."

"Assessed that the updated level of policy rate is adequate under the current outlook."

"Negative consequences of supply constraints in some sectors, particularly basic food, have been alleviated by the strategic solutions facilitated by Türkiye."

"Will continue to use all available instruments decisively within the framework of liraization strategy until strong indicators point to a permanent fall in inflation."

"Job creation has been stronger than peers."

"Effects of pricing formations that are not supported by economic fundamentals, strong negative supply shocks caused by the rise in global energy, food and agricultural commodity prices also push inflation higher."

"Growth dynamics are supported by structural gains."

"Stronger than expected contribution of tourism revenues to the current account balance continues."

"Leading indicators for the third quarter point to some loss of momentum in economic activity."

"Recent increase in the spread between the policy rate and the loan interest rate is considered to reduce the effectiveness of monetary transmission."