The Central Bank of the Republic of Turkey (CBRT) has raised the policy rate by 350 basis points to 46 percent. Expectations were that the policy rate would remain stable at 42.5 percent. Additionally, the Board increased the overnight borrowing rate by 300 basis points, from 46 percent to 49 percent. The overnight lending rate was also raised from 41 percent to 44.5 percent.

Following the Monetary Policy Committee (MPC) meeting chaired by TCMB President Fatih Karahan, the statement highlighted: “RISE IN MONTHLY INFLATION EXPECTED. The main trend of inflation has decreased in March. It is foreseen that the monthly core goods inflation will increase slightly in April due to developments in financial markets, while service inflation will remain relatively stable. Leading indicators suggest that domestic demand, while losing momentum in the first quarter, has remained stronger than expected, implying that its disinflationary effect has diminished. The potential impact of increasing protectionist tendencies in global trade on the disinflation process is closely monitored through global economic activity, commodity prices, and capital flow channels. Inflation expectations and pricing behaviors remain a risk factor for the disinflation process.”

“ROOM FOR ADDITIONAL STEPS. The steadfast stance in monetary policy, through balancing domestic demand, real appreciation of the Turkish lira, and improving inflation expectations, strengthens the disinflation process. Enhanced coordination of fiscal policy will also make a significant contribution to this process. A tight monetary policy stance will be maintained until a permanent decline in inflation and price stability are achieved. Therefore, the policy rate will be determined to ensure the required tightness for the expected disinflation process, considering inflation developments, the main trend, and expectations.”

“The Committee will determine the steps to be taken regarding the policy rate with a focus on the inflation outlook, through a cautious and meeting-based approach. In the event of a significant and persistent deterioration in inflation, the monetary policy stance will be tightened.”

“CLOSE MONITORING OF LIQUIDITY CONDITIONS. In response to recent developments in financial markets, additional steps supporting the monetary transmission mechanism have been promptly taken. Liquidity conditions will be closely monitored, and liquidity management tools will continue to be effectively utilized.”