CBRT continued the interest rate hikes that started after the May 2023 elections.
In the last monetary policy meeting of 2023, the bank raised the benchmark interest rate by 250 basis points.
The benchmark interest rate rose to 42.50 percent with an increase of 250 basis points.
CBRT stated that headline inflation, which recorded a limited increase in November, remained in line with the outlook presented in the last inflation report, while the current level of domestic demand, rigidity in services prices and geopolitical risks kept inflation pressures alive.
CBRT also stated that recent indicators suggest that the rebalancing in domestic demand continues as the monetary tightening is reflected on financial conditions and that a limited improvement has started in inflation expectations and pricing behavior.
CBRT signaled that the monetary tightening necessary for the permanent establishment of price stability will be maintained as long as necessary.
The CBRT stated that the current micro- and macroprudential framework has been simplified in a way to enhance the functionality of the market mechanism and strengthen macro financial stability, while loan rates are in line with the targeted level of financial tightness, and arrangements to increase the share of Turkish lira deposits are expected to continue to strengthen the transmission mechanism and improve the funding composition of the banking system, accompanied by monetary tightening.
In addition to the interest rate decisions, the CBRT said that it would continue with quantitative tightening by increasing the variety of sterilization tools it uses in order to support the monetary tightening process.
CBRT to hold deposit purchase auctions
In the statement on the CBRT’s website, it was reminded that Article 52 of the Central Bank of the Republic of Turkey Law stipulates that open market operations can be conducted in order to effectively regulate money supply and liquidity within the framework of monetary policy objectives.
“In this framework, Turkish Lira deposit purchase auctions will be held in order to strengthen the monetary transmission mechanism and increase the diversity of sterilization tools used,” the statement said.