Governor Sahap Kavcioglu chairs the Monetary Policy Committee (MPC). It matched the predictions of all but one economist in a Bloomberg survey and maintained the 9% target for the second month in a row.
The MPC, however, did not characterize the present level of rates as adequate in its most recent advice last month. According to Bloomberg Economics, this shift might presage further monetary easing.
Policymakers vowed to implement their liraization strategy in order to achieve price stability. These are policies that encourage the usage of Turkish money in a broader way.
Turkish Deposits are mostly denominated in Lira
This followed a monetary policy that defied convention with sudden easing cycles in 2021 and 2022.
The official cost of borrowing fell by 500 basis points and into single digits between August and November last year as rate cuts reduced the cost of borrowing. President Recep Tayyip Erdogan made specific appeals to ensure money is cheap. He believes this will stabilize consumer prices, contrary to conventional economic theory. Tugberk Citilci is head of research at Istanbul-based Invest AZ Menkul Degerler A.S. He believes that conditions may be ripe to restart monetary easing.
Impact on investments and industry
Before the decision on Thursday, Citilci, the lone economist in the election who predicted a reduction this week, stated that he expected support for exporters and businesspeople as industrial production remained low and capital investment ceased.
In order to get a handle on rising inflation, the central bank has used measures other than interest rates for the first time in nearly a quarter-century. By using government rules to shore up local cash and intervene in the manner commercial lenders extend credit, it’s been micro-managing the economy.
The MPC claimed in its announcement that the combined policy strategy being carried out is suppressing price growth.
Erdogan wants looser monetary and fiscal policies to boost demand in anticipation of presidential and parliamentary elections in May. Rates at this level, according to the Turkish president, are ideal for investment and economic expansion.
