CBRT Announces Interest Rate! How did the dollar react? - Coin Newsletter

The CBRT raised the policy rate to 46% this month after reducing it for the third time in a row. Dollar/TL fell to 38.09 after the interest rate decision.

The Central Bank of the Republic of Turkey (TCMB) raised the policy rate from 42.5% to 46%. The expectation was that it would remain constant.

Maintaining its tight monetary policy in recent months, the CBRT raised the interest rate, which it raised to 50% in November 2023, to 42.5% in February, and now it has decided to increase it again.

The Central Bank made the following statements in its statement after the interest rate increase:

"The Monetary Policy Committee (Kurul) decided to increase the policy rate (one-week repo auction rate) from 42.5 percent to 46 percent. The Committee also raised the Central Bank's overnight lending rate from 46 percent to 49 percent and the overnight borrowing rate from 41 percent to 44.5 percent.

The underlying trend of inflation declined in March. Monthly core goods inflation is expected to rise slightly in April due to developments in financial markets, while services inflation is expected to remain relatively flat. Leading data imply that domestic demand, although it lost momentum in the first quarter, remained above forecast and its disinflationary effect decreased.

The possible effects of increasing protectionist tendencies in global trade on the disinflation process through global economic activity, commodity prices and capital flows are closely monitored. Inflation expectations and pricing behavior continue to be a risk factor for the disinflation process."

The CBRT stated that the tight monetary policy stance will continue and that all tools will be used decisively until inflation reaches the 5% target.

Following the decision, a limited decline was observed in the foreign exchange markets. According to the data, the USDT/TRY parity fell to 38.09 after the announcement.