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Turkiye pledges to continue tightening until inflation outlook improves

05 July 2023 12:16 (UTC +04:00)

Turkiye will continue the 180-degree turn in monetary policy, which began with a sharp rate hike after the election last month, until the inflation outlook improves significantly, the bank said center on Monday, APA-Economics reports citing Reuters.

The hawkish policy stance came as data showed the central bank’s net foreign reserves recorded their biggest weekly jump on record as the bank reduced its interventions in the currency market to stabilize the lira.

“The process of monetary tightening is expected to continue until the outlook for inflation improves significantly,” the central bank said in the minutes of its June monetary policy committee meeting, during which it raised its main interest rate by 650 basis points to 15%.

The bank said the U-turn, after a two-year easing cycle, was the first step in a process to rein in inflation. Annual inflation was close to 40% in May, after hitting a 24-year high of over 85% in October last year.

The rate hike came during the first policy meeting hosted by new Central Bank Governor Hafize Gaye Erkan.

Prior to that, the one-week repo rate had fallen to 8.5% from 19% since 2021, and the bank had used foreign exchange reserves to support the lira, which nonetheless plunged to a series of record lows.