Turkish Tight Monetary Policy Maintained

February 18, 2021

Priorities are different at the Central Bank of Turkey, whose economy is again experiencing a vicious cycle of accelerating inflation and lira depreciation. Inflation expectations are higher, fed additionally by elevated food prices. From January to May of 2020, officials cut their one-week repo rate five times by a total of 375 basis points, only to reverse course with a trio of sharp hikes of 200 bps last September, 475 basis points in November and 200 bps in December. The rate was increased further this year at the January meeting or today’s, but a released statement warns of further tightening if that becomes necessary. Officials promise not to ease their stance until they see compelling evidence of falling inflation and signs to suggest that the downtrend will not be a temporary one.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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