Şahap Kavcıoğlu (Chairman), Taha Çakmak, Mustafa Duman, Elif Haykır Hobikoğlu, Emrah Şener, Monetary Policy Committee (Board) decided to keep the one-week repo auction rate, which is the policy rate, at 8,5 percent.
Although the recently announced data on economic activity has been at more positive levels than expected, recession concerns continue in the economies of developed countries with the effect of geopolitical risks and interest rate hikes. Although the negative effects of supply constraints in some sectors, especially in basic food, have been reduced thanks to the strategic solution tools developed by Turkey, producer and consumer inflation continues to be high on an international scale. The effects of high global inflation on inflation expectations and international financial markets are closely monitored. Although the divergence in the monetary policy steps and communications of the central banks of developed countries continues due to the differing economic outlook among countries, coordinated steps are taken to prioritize financial stability with swap agreements and new liquidity opportunities. Financial markets reflect expectations that central banks will soon end their rate hike cycles.
Leading indicators before the disaster of the century pointed out that in the first quarter of 2023, domestic demand was more lively than foreign demand and the growth trend was on the rise. Current data show that the economic activity in the earthquake region is recovering faster than expected, and it becomes clear that the earthquake will not have a permanent effect on the performance of the Turkish economy in the medium term. While the share of sustainable components in the composition of growth is high, the strong contribution of tourism to the current account balance, which exceeds expectations, continues to spread to all months of the year. In addition, the continued increase in domestic consumption demand, high energy prices and weak economic activity in the main export markets keep the risks on the current account balance alive. It is important for price stability that the current account balance becomes permanent at sustainable levels. The growth rate of the loans and the meeting of the financial resources reached with the economic activity in accordance with its purpose are closely monitored. As stated in the 2023 Monetary Policy and Liraization Strategy, the Board will resolutely continue to use the tools that will support the effectiveness of the monetary transmission mechanism and will align the entire policy toolkit, especially the funding channels, with the liraization targets. The Board will prioritize the creation of appropriate financial conditions in order to minimize the effects of the disaster and support the necessary transformation.
Although the improvement in the level and trend of inflation continues with the support of the integrated policies implemented, the effects of supply-demand imbalances caused by the earthquake on inflation are closely monitored. Supporting financial conditions became even more important after the earthquake in terms of maintaining the acceleration in industrial production and the increasing trend in employment. In this context, the Board decided to keep the policy rate constant. The Committee is of the opinion that the monetary policy stance is sufficient to support the necessary recovery after the earthquake by maintaining price stability and financial stability. The effects of the earthquake in the first half of 2023 are followed closely.
In line with its main objective of price stability, the CBRT will resolutely continue to use all the tools at its disposal until strong indicators pointing to a permanent decline in inflation emerge and the medium-term 5 percent target is reached. The CBRT will implement the Liraization Strategy with all its elements in order to institutionalize price stability in a permanent and sustainable way. The stability to be achieved in the general level of prices will positively affect macroeconomic stability and financial stability through the decrease in country risk premiums, the continuation of reverse currency substitution and the upward trend in foreign exchange reserves, and the permanent decline in financing costs. Thus, a suitable ground will be formed for the continuation of investment, production and employment growth in a healthy and sustainable way.