MPC: Policy rate kept at 24%, as expected

TURKEY - In Brief 13 Dec 2018 by Murat Ucer

---

In line with the market consensus, the CBRT’s Monetary Policy Committee kept the policy rate (one-week repo rate) unchanged at 24% (simple) today, at the last meeting of the year. Recall that after raising the policy rate by 625 bps at its September meeting (on September 13th), the Bank had kept short term rates unchanged at its previous meeting on October 25th (see chart). While the move was widely anticipated, markets must nevertheless be somewhat relieved to see that the Bank did the right thing today, given the pressures posed by the ongoing weakness in economic activity.Today’s statement had a bit of a hawkish feel to it as well, which kept the emphasis on continued “risks to price stability”, and reiterated, as in the October statement, that “the Committee has decided to maintain the tight monetary policy stance until inflation outlook displays a significant improvement.” The Bank’s take on economic activity was unchanged from the October statement.The bottom line is that the last MPC meeting of the year was uneventful, which is always something to feel relieved about, with the wording of the statement also suggesting that the Bank is in no hurry to ease. As we’ve noted in yesterday’s note however (MPC preview+, December 12, 2018), we think “the pressures on the Bank -- as well as on fiscal policy – for easing will start in the New Year, and intensify as we get closer to local elections (of March 31st), given the economic contraction that is now underway.”