Central Bank’s MPC meets this week for interest rate decision

Central Bank’s MPC meets this week for interest rate decision

ISTANBUL
Central Bank’s MPC meets this week for interest rate decision

All eyes will be on the Turkish Central Bank this week as members of its Monetary Policy Committee (MPC) will meet on Jan. 23 to decide on the key interest rate.

Economists expect the bank to continue rate cuts with another 250bps move to 45 percent.

The bank launched the easing cycle in December by lowering its policy rate — one-week repo auction rate — from 50 percent to 47.5 percent in a move that marked the first cut in nearly two years as inflation continued to slow.

Türkiye's annual inflation rate slowed for the seventh consecutive month in December.

Consumer prices rose by 44.38 percent last month, down from 47.1 percent in November.

The MPC meeting will take place against the backdrop of inflation expectations improving. A Central Bank survey last week showed that the 12-month ahead inflation expectations declined by 1.69 points to 25.38 percent.

The improvement in expectations continues along with disinflation, and the annual inflation expectation for the next 12 months has been falling for 15 months, Finance Minister Mehmet Şimşek commented on the results of the Central Bank survey.

“We will support the fight against inflation with our demand-side policies as well as supply-side steps in areas such as food, housing and energy,” Şimşek wrote on X.

Meanwhile, at a meeting with businesspeople in the province of Eskişehir, Central Bank Governor Fatih Karahan said that the bank aims to reduce inflation to 21 percent by the end of the year.

Karahan stated that the decisive stance in monetary policy has reduced the underlying trend of monthly inflation and strengthened the disinflation process through rebalancing domestic demand, real appreciation of the Turkish lira and improvement in inflation expectations. He also noted that increased coordination of fiscal policy will significantly contribute to this process.

“With the measures taken in the first phase, we prevented inflation from rising to higher levels," he underlined.

Karahan stated that the tight monetary policy stance will be maintained until there is a significant and permanent decline in the underlying trend of monthly inflation and inflation expectations converge to the projected forecast range.

In this direction, Karahan stated that the level of the policy rate will be determined in a way to ensure the tightness required by the envisaged disinflation process, taking into account inflation realizations and expectations.

“The committee will take its decisions with an inflation outlook-oriented, cautious and meeting-based approach," he added.