The Central Bank has maintained its policy rate at the expected level of 50%, in line with market expectations. This marks the seventh consecutive month without any change in interest rates. The messages from the CBRT regarding inflation garnered attention. The bank stated that there was an upward trend in the core inflation, highlighting increased uncertainties about the pace of improvement. Economists noted that there was no clear indication of an interest rate cut in the MPC text.

The awaited decision on interest rates from the Central Bank has been revealed.

The Central Bank (CBRT) kept its policy rate steady at 50%, in line with market expectations. Consequently, the interest rate has remained unchanged for seven consecutive months.

The CBRT, from June 2023 until March of this year, raised the policy rate by a total of 41.5 points to 50%.

CBRT’S INFLATION MESSAGE
In the Monetary Policy Committee (MPC) decision text, the most prominent difference from the previous month was regarding inflation. The text included the statement, “The main trend of inflation has slightly increased in September.”

The sentence, “However, the uncertainty about the pace of improvement in inflation has increased with recent data flows,” stood out in the text. The addition from last month’s text, “In case of a significant and lasting deterioration in inflation, monetary policy tools will be effectively utilized,” was also retained in this text.

INTERPRETATION OF THE CENTRAL BANK’S DECISION

There was no message regarding interest rate cuts from the Central Bank’s decision. Economists mentioned that the door for a rate cut was not entirely closed in November, but chances of a reduction in December and January were higher. Assessing the messages on inflation, economists indicated that interest rate cuts were not yet on the CBRT’s agenda.

FULL TEXT OF THE CENTRAL BANK’S ANNOUNCEMENT

The following statements were used in the MPC decision text:

“The main trend of inflation has slightly increased in September.

Indicators for the third quarter suggest that domestic demand continuing to slow down is approaching levels supportive of the decline in inflation.

DECREASE IN SERVICE INFLATION EXPECTED

While the core goods inflation remains low, improvements in service inflation are expected to occur in the last quarter.

The uncertainty about the pace of improvement in inflation has increased with recent data flows.

The Committee has noted that inflation expectations and pricing behaviors remain a risk factor for the disinflation process. THE EMPHASIS ON A TIGHT STANCE
The decisive stance in monetary policy, through rebalancing domestic demand, real appreciation of the Turkish Lira, and improving inflation expectations, will reduce the main trend of monthly inflation and strengthen the disinflation process.

The Committee reiterates its cautious stance against upward risks on inflation.

The tight monetary policy stance will continue until a significant and lasting decrease is achieved in the main trend of monthly inflation and inflation expectations come closer to the projected range. In case of a significant and lasting deterioration in inflation, monetary policy tools will be effectively utilized. SIGNAL FOR ADDITIONAL STEPS
In case of unexpected developments in credit and deposit markets, the monetary transmission mechanism will be supported by additional macroprudential measures.

Liquidity conditions will be closely monitored considering potential developments. Sterilization tools will continue to be effectively used. The Committee will determine the monetary and financial conditions that will achieve the main trend of inflation, reduce inflation in the medium term to the target of 5%, taking into account the delayed effects of monetary tightening. INDICATORS WILL BE CLOSELY MONITORED
Indicators regarding inflation and the main trend of inflation will be closely monitored, and the Committee will use all tools at its disposal decisively in line with its core objective of price stability.

The Committee will make its decisions predictably, data-focused, and within a transparent framework.”