UPDATE - Turkish Central Bank raises policy rate 250 basis points to 17.5%

UPDATES WITH MORE DETAILS FROM CENTRAL BANK'S STATEMENT

By Gokhan Ergocun

ISTANBUL (AA) – Türkiye's Central Bank raised its one-week repo rate, also known as the policy rate, by 250 basis points on Thursday to 17.5%, the highest level since October 2021.

The bank's Monetary Policy Committee decided "to continue the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior."

Many central banks, it recalled, continue the monetary tightening process due to higher-than-targeted inflation rates, and the committee said the upward trend in prices also continue in Türkiye.

It stressed: "The strong course of domestic demand, cost pressures stemming from wages and exchange rates and the stickiness of services inflation have been the main drivers.

"In addition to these factors, the committee anticipates that tax regulations and the deterioration in pricing behavior will put further pressure on inflation."

It noted that the committee will continue to simplify and improve existing micro and macroprudential framework, and the simplification process will continue to be gradual.

"In this context, in addition to the increase in the policy rate, the committee has made decisions on quantitative tightening and selective credit tightening to support the monetary policy stance," it added.

In June, the bank increased its policy rate by 650 basis points to 15% in the first hike in 27 months.

The rate had been 18% in September 2021 before being cut to 16% the next month.

According to an Anadolu survey last week, economists expected a 500-basis-point interest rate hike, with the lowest estimate at 250 basis points and the highest at 650.