Turkey Monetary Policy September 2022


Turkey: TCMB continues to prioritize economic growth over price stability, lowers rate in September

September 22, 2022

The Central Bank of the Republic of Turkey (TCMB) delivered another surprise rate cut at its 22 September meeting, despite red-hot inflation. The TCMB lowered the one-week repo rate by 100 basis points from 13.00% to 12.00%. Analysts had expected the Bank to stand pat, but the latest decision pushed real interest rates deeper into negative territory. Consequently, the Turkish lira fell to a record low against the USD.

In deliberating its unconventional decision, the TCMB focused on supporting economic growth over reining in inflation. The Bank stated that “indicators have been pointing to a slowdown in growth due to weakening demand”. Regarding the global economy, “effects of geopolitical risks” continue to weigh on activity and a recession is increasingly probable. Turning to domestic inflation, the Bank noted that it is driven by the lagged and indirect effects of rising energy prices and pricing behavior that is not supported by economic fundamentals, saying: “The Committee expects disinflation process to start on the back of measures taken and decisively implemented for strengthening sustainable price and financial stability”.

The TCMB struck a largely unchanged tone compared to its prior meeting, reiterating its commitment to “use all available instruments decisively within the framework of liraization strategy until strong indicators point to a permanent fall in inflation and the mediumterm 5 percent target is achieved in pursuit of the primary objective of price stability.”

The next meeting is scheduled for 20 October.

Commenting on the decision, Muhammet Mercan, chief Turkey economist at ING, added:

“[The] move will do little to address Turkey’s inflationary challenges. The current policy setting does not prioritise disinflation and inflation will likely remain elevated in the near term.”

The Bank’s latest decision again took analysts by surprise. Last month, FocusEconomics panelists saw the one-week repo rate ending 2022 at 12.59% and 2023 at 19.90%. A new FocusEconomics Consensus Forecast report will be published on 4 October.

Author:, Economist

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Turkey Monetary Policy Chart

Turkey Monetary Policy September 2022

Note: One-week repo rate in %.
Source: Central Bank of the Republic of Turkey (CBRT).

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