Central Bank: The effects of the fall in external demand are closely monitored

The Central Bank of the Republic of Turkey (CBRT) announced the meeting summary of the Monetary Policy Committee (MPK) for the January meeting, where the policy rate was held constant at 9 percent. The CBRT emphasized that the effects of the decrease in external demand on the conditions of aggregate demand and production are closely monitored.

“While moderate price movements reduced annual inflation in all subgroups, the food and basic goods groups played a larger role in this decline with their contributions,” the minutes read. Although the recently announced data was more positive than expected, it was stated that recession concerns in the economies of developed countries continued with the effect of geopolitical risks and interest rate hikes.

PROCUREMENT IN EXTERNAL DEMAND

In summary, the following statements were included in the minutes:

* It is observed that efforts continue to find solutions with new practices and support tools developed by central banks for the growing uncertainties in financial markets. In addition, financial markets began to reflect expectations that central banks, which raised interest rates in the face of growing recession risks, would soon end their rate-raising cycles.

* With the support of holistic policies implemented to strengthen sustainable price stability and financial stability, improvements in the level and trend of inflation began to be observed. The effects of the decrease in external demand on the conditions of aggregate demand and production are closely monitored.

* Strong growth was achieved in the first three quarters of 2022. Indicators for the last quarter of the year indicate that the slowdown in growth due to weaker external demand is offset by relatively strong developments in domestic demand.

* It is observed that the effects of the pressures of external demand on the manufacturing industry on internal demand and the supply capacity remain for now at a limited level. Taking into account the registered domestic and foreign market orders and the expectations of future orders from companies in the manufacturing industry, it can be observed that the weak course in the expectations of export orders continued in the last quarter, while the expectations of orders of the internal market registered an increase. In this context, despite the fact that external demand continues to be weak, it can be observed that internal demand has followed a relatively stronger trajectory.

* It is essential that financial conditions are favorable in terms of maintaining the acceleration of industrial production and the growing trend in employment, as well as the sustainability of structural gains in supply and investment capacity, at a time when uncertainties on global growth and geopolitical risks increase further. In this context, the Board of Directors decided to keep the policy rate constant.