The Central Bank of the Republic of Turkey (CBRT) announced on Thursday that it increased its monetary policy rate (one-week repo) by 200 basis points to 19%. Analysts’ expectation was an increase of 100 basis points to 18%. This generated a rise in the Turkish lira throughout the market. The USD / TRY fell from 7.4500 to 7.3217, the lowest level since March 3.
The CBRT stated that economic activity “is on the right track.” He explained that the increase in import prices negatively affects the current account balance.
Regarding the exchange rate, the central bank said that it impacts the inflation outlook. Regarding inflation, he said that the prices of raw materials are having an adverse impact on inflation.
The The monetary authority justified its actions by stating that the “strong” anticipated adjustment is taking into account the upward risk for inflation.. The adjustment policy “will be decisively maintained for a prolonged period” to achieve an effect disinflationary. Added that if necessary an additional adjustment will be applied.
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