Central Bank of Turkey’s Repo Rate Lifted Another 200 Basis Points

December 24, 2020

2020 was a very active year for Turkish monetary policy. Five repo rate reductions in January-May totaled 375 basis points but were followed by sharp hikes of 200 basis points in both September and today, flanked around a huge 475-basis point increase in November. The rate benchmark is ending the year at 17% compared to 12% at the beginning, and the reason for this sharp reversal is an upturn in actual and expected inflation, fueled by lira depreciation, increasing international food and other commodity prices and deterioration in inflation expectations, according to the Central Bank of Turkey‘s released statement today. Policymakers promise “tightness of monetary policy stance will be decisively sustained until strong indicators point to a permanent fall in inflation in line with the targets and to price stability.” The CPI inflation target is 5% +/-2 percentage points. From 8.55% in October 2019, the 12-month rate of increase in consumer prices rose to 11.75% by this past September and accelerated further to a 15-month high of 14.03% last month. Producer price inflation has climbed from 5.53% this past May to 23.11% six months later.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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