CBRT: The adjustment will be strengthened until a significant improvement in the inflation outlook is achieved

Summaries of the meeting in which the Central Bank’s Monetary Policy Committee (CBRT) decided last week to sharply increase interest rates by 750 basis points were published.

In the summaries it was stated that the leading indicators point to the continuation of high monthly price increases in August, for which reason it was estimated that annual inflation would increase “significantly”.

Furthermore, it was stated that the effects of exchange rate difference payments from KKM’s accounts on TL’s liquidity were closely monitored and necessary measures were taken.

MONETARY POLICY ASSESSMENTS

The summaries included the following statements on monetary policy:

* The simplification measures will continue gradually and the speed and order of the transformation will continue to be determined by the impact analysis of this process. .

* In this context, regulations to increase the proportion of deposits in Turkish lira will strengthen the monetary transmission mechanism.

* In addition to interest rate increases, the Board will continue to make selective credit and quantitative tightening decisions that will support the monetary tightening process.

* These decisions are intended to balance excess liquidity and consumer demand for the Turkish lira and increase the effectiveness of monetary policy, while official interest rates, which are the main policy instruments, affect monetary conditions and expectations and financial.

* With the acceleration of retail loans, it has been assessed that domestic demand deteriorates price stability both directly and through the current account balance. The process of balancing domestic demand is expected to be supported as a result of selective credit adjustment decisions.

* The liquidity of the Turkish lira, which enters the financial system due to exchange rate difference payments from currency-protected deposit accounts, is closely monitored.