Turkish Central Bank Raises Rates A Hair Above Consensus
Central Bank of the Turkish Republic announced their highly anticipated interest rate decision with a 1.25% increase to 17.75%. US Dollar and Euro took a hit following the announcement as the market was largely geared for a 1% hike at most.
The US Dollar fell as low as 4.4565, just shy of its 4.45 support. Euro’s fall so far has been milder from 5.33 to 5.29. This is the second time the CB increased the interest rate in less than a month. In their previous May 23 Emergency Meeting the board had already upped the borrowing rate from 13% to 16%. The additional 0.25% increase today came as somewhat as a surprise, but it remains to be seen if the Lira can rise above 4.44, the high it saw following the earlier decision.
Central Bank of the Turkish Republic made the following statement following the announcement:
Recent economic date points to a balancing of economic indicators. While we see strong demand overseas, we see a more restrained action domestically.
Increases in costs seem to be having the most effect on the rise of inflation. However, there is also a propagation of price increases at lower levels. Despite the moderation in demand side economics, there is a widespread conduct of rising prices that risk higher inflation. In that regard, the board has decided to implement a tighter monetary policy in order to preserve price stability.
The Central Bank will continue to use all the tools it has at its disposal to continue to promote price stability. Tightening of our monetary policy will resume until we see definite and explicit signs in inflationary outlook. We will continue to monitor inflationary expectations, pricing behavior and other factors that affect inflation and continue to tighten policy as needed.
We also want to state that any new developments, news and indications may cause the Board to review and change its policy.