The MPC acts bold, what’s next?

TURKEY - Report 24 Aug 2023 by Murat Ucer

In an encouraging and surprising move, the MPC/CBRT raised the policy rate by a markedly more than expected 750 bps to 25%, versus a consensus expectation of 250 bps (see chart). That the decision came at the very first MPC meeting of the newly appointed deputies, also send the right signals. The new statement (link here) has modified the section on inflation in a more hawkish (and realistic) direction as well, while adding a technical sentence (“recent regulations targeting a rising share of Turkish lira deposits will strengthen the monetary transmission mechanism”) in reference to the KKM-centered measures introduced over the past weekend.

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