Turkey: CBRT leaves policy rate unchanged at 19% as expected

The Central Bank of the Republic of Turkey (CBRT) announced on Thursday that it left its policy (one-week repo) rate unchanged at 19% as expected. In its policy statement, the central bank refrained from repeating last month's pledge to "decisively" maintain a tight policy.

Market reaction

With the initial market reaction, the USD/TRY dropped below 8.0200 before making a sharp U-turn. As of writing, the pair was up 0.3% on the day at 8.0915. 

Key takeaways from policy statement as summarized by Reuters

"Despite the constraining effect of the pandemic, domestic economic activity is strong, led by domestic and external demand."

"Upward trend in commodity prices has decelerated."

"Manufacturing industry activity exhibits a strong momentum."

"Nevertheless, risks for economic activity exist in either direction depending on the progress of the pandemic and the vaccination process."

"Rise in exports and the fall in gold imports, strong domestic demand and commodity prices continue to adversely affect the current account balance."

"Upward trend is observed in consumer loan growth despite tightening financial conditions."

"Will continue to use decisively all available instruments in pursuit of the primary objective of price stability."

"Policy rate will continue to be determined at a level above inflation to maintain a strong disinflationary effect."

"Seeking permanent fall in inflation."

"Will continue to take its decisions in a transparent, predictable and data-driven way."

"High levels of inflation expectations continue to pose risks to the inflation outlook."