Turkiye cuts policy rate to 47.5%, revises monetary policy framework

Inflation trends remained largely stable in November, with leading indicators suggesting a decline in December. Data from the last quarter indicates a continued slowdown in domestic demand at disinflationary levels. While core goods inflation stays low, a more noticeable improvement has been observed in services inflation, said Central Bank of the Republic of Turkiye in a press release.

The decisiveness regarding tight monetary stance is bringing down the underlying trend of monthly inflation and strengthening the disinflation process through moderation in domestic demand, real appreciation in Turkish lira, and improvement in inflation expectations.

Increased coordination of fiscal policy will play a key role in supporting disinflation efforts. The tight monetary policy will remain in place until a lasting decline in monthly inflation trends is achieved, and inflation expectations align with forecasts. Policy rates will be set to ensure the necessary tightness for the disinflation path, factoring in both current and projected inflation, said the release.

Considering the lagged effects of monetary tightening, the Committee will make its policy decisions to create the monetary and financial conditions necessary to ensure a decline in the underlying trend of inflation and to reach the 5 per cent inflation target in the medium term.

Indicators of inflation and underlying trend of inflation will be closely monitored, and the Committee will decisively use all the tools at its disposal in line with its main objective of price stability. It will make its decisions in a predictable, data-driven and transparent framework, concluded the release.

ALCHEMPro News Desk (SG)