The Central Bank of the Republic of Turkey (CBRT) decided not to change the policy interest rate, also known as the one-week repo rate, and fixed it at the current level of 24 percent.
In reaction to CBRT’s 24 percent policy rate announcement at its Monetary Policy Committee (MPC) on Thursday, the Turkish lira lost 1.5 percent and the exchange rate of the US dollar increased from 5.89 to 5.96 lira following the decision.
“The Committee has decided to maintain the tight monetary policy stance until the inflation outlook displays a significant improvement,” MPC’s statement said. The Central Bank’s statement added: “Developments in domestic demand conditions have led to some improvement in inflation indicators. Yet, higher food and import prices, and the elevated course of inflation expectations point to continued risks to price stability.”
“The Central Bank scraps the decision of ‘if necessary, the additional tightening will be done’, which was included in the previous decisions, and it seems to have led to the sharp increase in the exchange rate,” Turkey’s well-known economist, Mahfi Egilmez, tweeted, referring to CBRT’s decision.
Turkey’s inflation rate held steady at just below 20 percent in March, according to the Turkish Statistical Institute (TurkStat). Since August last year, the Turkish lira has lost an historical 40 percent against the US dollar. This is due to political tension between Ankara and Washington over the Pastor Andrew Brunson crises and Turkey’s order of the Russian S-400 defense system.