On Thursday, Turkey's central bank made the anticipated move to increase its key interest rate once again. This is an effort to bring down the inflation trend and help reach its target of 5 percent in the medium term. The hike also seems to signal the end of the bank's tightening cycle.
The Monetary Policy Committee of the Central Bank of the Republic of Turkey (CBRT), steered by Governor Hafize Gaye Erkan, decided to raise the policy rate from 42.5 percent to 45.0 percent.
CBRT stated that taking into account the delayed effects of monetary tightening, the Committee considers it has accomplished the level of monetary severity necessary to set the deflationary course, and that this level will be upheld as long as necessary.
It further stated that it will maintain the present policy rate level until a noticeable reduction in monthly inflation's underlying trend is observed and until inflation expectations align with the projected forecast range.
The central bank added that it would re-evaluate its policy stance if significant and persistent risks to inflation outlook arise.
The latest data indicates that Turkey's consumer price inflation rose to 64.8 percent in November, up from 62.0 percent.
According to the bank, the rise in headline inflation concurred with the outlook outlined in the last inflation report.
Liam Peach, an economist at Capital Economics, anticipates that the disinflation process will begin by the middle of the year. He said, despite inflation expected to fall to 30-35 percent by year-end (down from the present 65 percent), there is a possibility that the CBRT will initiate a cycle of easing by the end of the year. Yet, his primary projection is that rates will remain unchanged throughout 2024.
