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Turkey Monetary Policy December 2022

Turkey: TCMB stands pat in December

The Central Bank of the Republic of Turkey (TCMB) fulfilled expectations at its 22 December meeting by keeping the one-week repo rate unchanged at 9.00%. The Bank had previously brought the rate to President Erdogans year-end single-digit target in November and ended its easing cycle.

In its press release, the Bank reiterated that inflation has chiefly been driven by surging energy costs and supply shocks, both stemming from geopolitical developments. The TCMB expressed concerns over an economic slowdown in the last quarter of 2022 and ultimately decided to prioritize growth over price stability. However, the Bank expects disinflation to start on the back of previous macroprudential measures and the resolution of the war in Ukraine.

The Bank stated that the current rate guarantees supportive financial conditions and therefore sustains gains in supply and investment capacity. The TCMB also reiterated that it is committed to using all of its available tools until indicators point to a sustained fall in inflation and the medium-term 5.0% percent target is achieved.

The next meeting is scheduled for 19 January.

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

“All in all, while there are expectations of some easing in the current banking sector regulations along with targeted credit stimulus measures […], and budget spending has further accelerated lately, we continue to expect the CBT to keep the policy rate unchanged at 9% ahead of the elections. The CBTs macro-prudential framework signalled [that] further strengthening in December would be key for the macro and financial outlook in the near term.”

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