CBRT cuts by 250 basis points by Atilla Yesilada

TURKEY - In Brief 26 Dec 2024 by Atilla Yesilada
‘Tis the season to be jolly, thus I locked Murat into our broom closet to promote my brand of CBRT watch, which is highly emotional and sensationalist, similar to gonzo journalism. CBRT MPC gave the nation a New Year’s gift by cutting rates by 250 basis points. It also narrowed the corridor between interbank borrowing and lending rates to 125 basis points. The MPC statement proclaimed that “The decisiveness regarding tight monetary stance is bringing down the underlying trend of monthly inflation and strengthening the disinflation process through moderation in domestic demand, real appreciation in Turkish lira, and improvement in inflation expectations. Going forward, increased coordination of fiscal policy will also contribute significantly to this process”. CBRT, like Fed is now highly data-dependent if the statement is to be taken at face value, promising “The tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations converge to the projected forecast range. Accordingly, the level of the policy rate will be determined in a way to ensure the tightness required by the projected disinflation path, taking into account both realized and expected inflation. The Committee will make its decisions prudently on a meeting-by-meeting basis with a focus on the inflation outlook. Monetary policy tools will be used effectively in case a significant and persistent deterioration in inflation is foreseen”. I don’t take the statement too seriously, because it very obviously denies observable facts, such as CBRT’s own monthly household and private sector inflation expectations s...

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