MPC: Done for now on easing, but more interventions to come

TURKEY - In Brief 24 Nov 2022 by Murat Ucer

As openly stated at its last meeting statement (link here), the CBRT/MPC reduced the policy rate to much anticipated single-digit 9% rate today, from 10.5% previously. The statement said, also as expected, the easing cycle is done for now, but left the door open for further easing down the road, as we see it, given the (newly added) emphasis on “increasing risks regarding global demand” (link here). Also worth highlighting, perhaps, is the fact that the Bank still seems unhappy about the ongoing differential between the loan rates at just over 16.3% according to latest data available at this writing (of November 11) – which, parenthetically, has been steadily declining since the introduction of government debt purchase requirements in August (see chart) -- and the policy rate of around 10.5% at the time. The relevant sentence now reads as follows (with the modifications from the previous statement marked in bold): “The Committee will continue to decisively use [changed from “further strengthening”, previously] the tools supporting the effectiveness of the monetary transmission mechanism and implement additional measures. The comprehensive set of policies to be implemented will be published in the 2023 Monetary and Exchange Rate document in December”. This means that the Bank may be done with the rate cuts -- for now, but not with its myriad distortionary interventions, which may be dialed up as soon as early next year.

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