Investing.com – Expectations for a change in monetary policy were strengthened after the dismissal of the CBRT President in March, but the central bank kept the interest rate stable at 19% in May following April, due to both inflation and the rise in the exchange rate.
CBRT removed the hawk statements from the decision text in the April meeting, and in the text of the meeting held last week. “The Committee has decided to maintain the tight monetary stance by keeping the policy rate constant.” statement “The Board has decided to keep the policy rate constant.” changed to. In the MPC summary announced today, the board emphasized inflation and included a tight monetary stance.
- The monetary policy stance will be determined with the focus on permanently lowering inflation and reaching the price stability target with a cautious approach, taking into account the upward risks to the inflation outlook. Accordingly, the policy stance will continue to be determined at a level of tightness that will establish the disinflation process as soon as possible, taking into account inflation developments and inflation expectations, and ensure its continuity until the medium-term targets are reached.
- Demand and cost factors, supply constraints in some sectors and high levels of inflation expectations continue to pose risks on pricing behavior and inflation outlook. The slowdown effects of monetary tightening on loans and domestic demand have begun to be observed. Considering the high levels of inflation and inflation expectations, Until there is a significant decrease in the April Inflation Report forecast path The current stance in monetary policy will be maintained. Accordingly, the Board kept the policy rate constant at 19 percent. decided to maintain the tight monetary stance.
- Tight monetary stance; It will serve as an important buffer against exogenous and temporary volatility in the context of inflation expectations, pricing behavior and financial market developments.
- TCMB, will continue to use all the tools at its disposal with determination in line with the main objective of price stability.. Until strong indicators that point to a permanent decline in inflation are formed and the medium-term target of 5 percent is reached, the policy rate will continue to be set at a level above inflation, maintaining a strong disinflationary effect.
- Stability at the general level of prices will positively affect macroeconomic and financial stability through the decline in country risk premiums, the start of reverse currency substitution, the trend of increasing foreign exchange reserves and permanent decline in financing costs. Thus, a suitable ground will be created for the continuation of the increase in investment, production and employment in a healthy and sustainable manner.
- Demand and cost-side effects on inflation remain important in line with the indicators of credit market and economic activity, as well as exchange rate volatility and developments in import prices. Although a more moderate course is observed in retail loans as well as commercial loans, the permanence of this development is closely monitored in terms of macroeconomic stability. The outlook for domestic demand, international prices and global risk appetite keep the risks arising from external financing needs for the balance of payments alive. In line with the price stability target in monetary policy, the Committee will continue to adopt an approach that also takes into account the risks to financial stability.
Author: Deniz Engin
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