The Central Bank of the Republic of Turkey (CBRT) announced an unexpected increase in the policy interest rate to 50%, resulting in a decrease in the dollar.
In its announcement today, the TCMB stated that it raised the interest rate from 45% to 50%, a decision that exceeded expectations. The TCMB had kept its policy interest rate steady last month after months of increases following a change in the previous administration. The new administration made a second decision to increase the rate by 500 basis points.
Interest rates had been rapidly reduced to 8.5% in the previous period, but with the recent decisions over the past 10 months, the interest rate has reached 50%.
According to the CBRT, the policy interest rate will be determined to provide monetary and financial conditions that will help reduce the core trend of inflation and reach the medium-term target of 5% inflation.
The CBRT’s press release about interest rates included the following statement:
The Monetary Policy Committee (the Committee) has decided to hike the one-week repo auction interest rate, which is the policy rate, from 45% to 50%. The Committee has also decided to make changes in the operational framework, setting the Central Bank’s overnight borrowing and lending rates at a margin of +/- 300 basis points relative to the one-week repo auction interest rate.
The announcement also stated, “Other indicators for the near term suggest that the resilient trend in domestic demand continues.”
Prior to the announcement, the USDT/TRY pair, which was at 33.08 levels, decreased to 32.83 after the announcement.
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