The Monetary Policy Committee (MPC) has decided to lower the policy rate the one-week repo auction rate from 50% to 47.5%. In addition, the Committee has adjusted the monetary policy operational framework, setting the Central Bank’s overnight borrowing and lending rates 150 basis points below and above the one-week repo auction rate, respectively. These measures aim to balance inflation management with domestic demand moderation.
Inflation trends in November 2024 were flat, while early indicators for December point to a decline in the underlying inflation trend. Domestic demand remains at disinflationary levels and continues to decelerate. Core goods inflation is subdued, and services inflation is showing noticeable improvement. Unprocessed food inflation, which had surged in the previous months, appears to have moderated in December.
Despite some improvement in inflation expectations and pricing behavior, risks to the disinflation process persist. The Committee noted that its tight monetary stance is yielding positive outcomes, including a slowdown in domestic demand, a real appreciation of the Turkish lira, and better inflation expectations. Enhanced fiscal policy coordination is expected to further support disinflation efforts.
The MPC emphasized that it will maintain its tight monetary stance until a significant and sustained decline in the underlying inflation trend is observed and inflation expectations align with the projected forecast range. The policy rate will be set to ensure the required monetary tightening consistent with the disinflation path, taking into account both realized and expected inflation.
Future decisions will be data-driven and made on a meeting-by-meeting basis, with a focus on the inflation outlook. The Committee is prepared to deploy monetary policy tools effectively should a persistent deterioration in inflation occur. It also plans to address any unanticipated developments in credit and deposit markets through additional macroprudential measures, ensuring the monetary transmission mechanism remains robust.
Liquidity conditions are under close monitoring, with sterilization tools continuing to be employed effectively. The Committee highlighted the importance of considering the delayed effects of monetary tightening when formulating policies to create financial conditions that support the desired disinflation trajectory.
The MPC reiterated its commitment to achieving a 5% inflation target in the medium term. To this end, it will closely monitor inflation indicators and underlying trends, making decisions in a predictable, data-driven, and transparent framework.
A summary of the latest Monetary Policy Committee meeting will be published within five working days, providing further insights into the decision-making process and its implications for the broader economy.