Press Release on Interest Rates (2024-69)
No: 2024-69
December 26, 2024
Press Release on Interest Rates
Participating Committee Members
Yaşar Fatih Karahan (Governor), Osman Cevdet Akçay, Elif Haykır Hobikoğlu, Hatice Karahan, Fatma Özkul.
The Monetary Policy Committee (the Committee) has decided to reduce the policy rate (the one-week repo auction rate) from 50 percent to 47.5 percent. The Committee has also decided to adjust the monetary policy operational framework by setting the Central Bank overnight borrowing and lending rates 150 basis points below and above the one-week repo auction rate, respectively.
The underlying trend of inflation was essentially flat in November. Leading indicators point to a decline in the underlying trend in December. Indicators for the last quarter suggest that domestic demand, standing at disinflationary levels, continues to slow down. While core goods inflation remains low, the improvement in services inflation has become more apparent. Unprocessed food inflation appears to have moderated in December after an elevated course in the previous two months. While inflation expectations and pricing behavior tend to improve, they continue to pose risks to the disinflation process.
The decisiveness regarding tight monetary stance is bringing down the underlying trend of monthly inflation and strengthening the disinflation process through moderation in domestic demand, real appreciation in Turkish lira, and improvement in inflation expectations. Going forward, increased coordination of fiscal policy will also contribute significantly to this process. The tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations converge to the projected forecast range. Accordingly, the level of the policy rate will be determined in a way to ensure the tightness required by the projected disinflation path, taking into account both realized and expected inflation. The Committee will make its decisions prudently on a meeting-by-meeting basis with a focus on the inflation outlook. Monetary policy tools will be used effectively in case a significant and persistent deterioration in inflation is foreseen.
In case of unanticipated developments in credit and deposit markets, monetary transmission mechanism will be supported via additional macroprudential measures. Liquidity conditions are closely monitored and assessed with respect to prospective developments. Sterilization tools will continue to be implemented effectively.
Taking into account the lagged effects of monetary tightening, the Committee will make its policy decisions so as to create the monetary and financial conditions necessary to ensure a decline in the underlying trend of inflation and to reach the 5 percent inflation target in the medium term.
Indicators of inflation and underlying trend of inflation will be closely monitored, and the Committee will decisively use all the tools at its disposal in line with its main objective of price stability.
The Committee will make its decisions in a predictable, data-driven and transparent framework.
The summary of the Monetary Policy Committee Meeting will be released within five working days.