While the negative consequences of supply constraints in some sectors have been alleviated by the strategic solutions facilitated by Turkiye, the high level in producer and consumer inflation continues on an international scale.

Turkiye’s monetary policy committee has kept its policy rate unchanged at 8.5 per cent due to concerns over the impact of a recent earthquake on the economy, as well as geopolitical risks, interest rate hikes, and high global inflation. The committee remains cautious about inflation and is closely monitoring its effects on financial markets.

Coordinated steps have been taken to prioritise financial stability through swap agreements and new liquidity facilities. The committee is closely monitoring the effects of high global inflation on inflation expectations and international financial markets, the committee said in a statement.

Before the earthquake, leading indicators pointed to a stronger domestic demand compared to foreign demand, and an increase in the growth trend in the first quarter of 2023. The impact of the earthquake on production, consumption, employment, and expectations is being extensively evaluated. While the earthquake is expected to affect economic activity in the near term, it is anticipated that it will not have a permanent impact on performance of the Turkish economy in the medium term.

The CBRT will continue to use all available instruments decisively until strong indicators point to a permanent fall in inflation and the medium-term 5 per cent target is achieved in pursuit of the primary objective of price stability. The CBRT will implement Liraization Strategy in order to create an institutional basis for permanent and sustainable price stability. Stability in the general price level will foster macroeconomic stability and financial stability through the fall in country risk premium, continuation of the reversal in currency substitution and the upward trend in foreign exchange reserves, and durable decline in financing costs.

The committee will prioritise the creation of supportive financial conditions in order to minimise the effects of the disaster and support the necessary recovery. Sustainable current account balance is important for price stability, and the rate of credit growth and allocation of funds for real economic activity purposes are closely monitored. As announced in the 2023 Monetary Policy and Liraization Strategy document, the entire policy toolset, particularly funding channels, will be aligned with liraization targets.

Fibre2Fashion News Desk (DP)