Turkish Central Bank increases policy rate to 35 percent

The Monetary Policy Committee of the Central Bank of the Republic of Türkiye (CBRT) raised policy interest rate by 500 basis points to 35 percent.

The Monetary Policy Committee, which convened under the leadership of CBRT Governor Hafize Erkan on October 26, decided to raise the policy rate, the one-week repo auction interest rate, from 30 percent to 35 percent.

“The Committee decided to continue the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior. The Committee continues to simplify and improve the existing micro- and macroprudential framework. Guided by impact analyses, the simplification process is advancing gradually,” the statement released after the decision read.

Policy rate raised, inflation readings above expected

Turkish Central Bank stated that the inflation readings were above the projected level in the third quarter of the year and that the strong course of domestic demand, the stickiness of services inflation and the deterioration in inflation expectations continue to put upward pressure on inflation.

“In this framework, while the year-end inflation is projected to be close to the upper bound of the forecast range provided in the Inflation Report (Report), it is also evaluated that the underlying trend in monthly inflation is on course to decline. On the other hand, geopolitical developments pose risks to the inflation outlook due to oil prices. Through the monetary tightening process, the Committee is determined to establish the disinflation course in 2024 in line with the Report,” the statement read.

The inflation which reached the Central Bank’s 58 percent year-end forecast in August, the Consumer Price Index (CPI) rose by 4.75 percent in September to 61.53 percent year-on-year.

Central Bank Governor Gaye Erkan had announced the year-end inflation forecast for 2023 as 58 percent and the year-end inflation forecast for 2024 as 33 percent at the Inflation Report presentation meeting in July.

In the September survey of the Central Bank Market Participants, the year-end inflation forecast was raised to 67 percent.

In the statement made after the last committee meeting, it was stated that the year-end expectations for the increase in inflation “will hover close to the upper limit of the forecast range in the Inflation Report”.

Loses Borsa Istanbul after Erdoğan’s Hamas statement

Following Recep Tayyip Erdoğan’s statement on Hamas, losses in the BIST 100 index exceeded 7 percent.

Borsa Istanbul announced that after the losses on October 25, the Index-Linked Circuit Breaker System was activated and transactions in all rows in the stock market were temporarily suspended for the second time.

The circuit breaker worked at 16.49 as the decline in the BIST 100 index exceeded 5 percent. After the transactions resumed, the stock market cut the circuit again at 17.23 when the decline exceeded 7 percent.

Borsa Istanbul’s statement to the Public Disclosure Platform (KAP) is as follows:

“As of 17.23:13, the second level of the index-linked circuit breaker was triggered and transactions were temporarily suspended in all trading lines in the Equity Market, Equity and Equity Index-based contracts in the Futures and Options Market (VIOP) and Equity Repo Market in the Debt Securities Market (BAP). In the Equity Market, trading in warrants, certificates and new share purchase right coupons will not be resumed today, while trading in other trading lines will be resumed with the closing session at 18:01. In VIOP Equity and Equity Index based contracts, trading will be resumed at 18:08 with the continuous trading method. Transactions in BAP Equity Repo Market will not be resumed today.”