The Central Bank of Türkiye on Thursday raised its policy rate by 500 basis points to 30%, meeting market forecasts.
“The Monetary Policy Committee decided to continue the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior,” a bank statement said.
At its August meeting, the bank hiked its policy interest rate by 750 basis points to 25%. It pledged to continue the monetary tightening process to help bring down inflation.
The bank stressed that the inflation came in above expectations in July and August.
“As the strong course of domestic demand and the stickiness of services inflation persist, the increase in oil prices and the ongoing deterioration in inflation expectations pose additional upside risks to inflation,” it noted.
According to the latest data from TurkStat, Türkiye’s annual consumer inflation rose to 58.94% in August, up from 47.8% in July.
After the appointment of Governor Hafize Gaye Erkan, the bank ended its 27-month monetary easing cycle and on Thursday raised rates for the fourth consecutive meeting.
“The Committee evaluated that tax regulations and cost pressures stemming from wages and exchange rates, which have been pushing up inflation, have broadly passed through to prices, and that the underlying trend in monthly inflation is on course to decline,” the bank said.
With maintaining the monetary tightening stance, the disinflation course in 2024 will be in line with the bank’s inflation report, it stressed.
The bank hiked its year-end inflation forecast upwards for 2023, 2024, and 2025 in its third quarterly inflation report released in July.
The country’s year-end inflation rate is projected to come in at 58% this year, 33% in 2024, and 15% in 2025.