The Central Bank of Turkey raised the rate to a new maximum in 20 years

quote.ru: The Central Bank of Turkey at its meeting on December 21 raised the discount rate by 250 bps. — from 40% to 42.5% per annum. This is reported on the regulator's website.

The regulator is tightening monetary policy for the seventh time in a row to combat high inflation in the country.

According to Trading Economic, the last time the rate exceeded this value was just over 20 years ago - in April 2003 it reached 44%, and then dropped to 41%.

Most economists surveyed by Bloomberg predicted that the Turkish Central Bank would raise the rate by 250 basis points, to 42.5%. Analysts at Standard Chartered, unlike other experts, predicted a larger increase - by 500 basis points.

The Central Bank of Turkey expects to complete the tightening cycle of monetary policy as soon as possible, the regulator said in a press release. The current level of domestic demand, the persistence of inflation in the service sector and geopolitical risks support inflationary pressure, the Central Bank said. On the other hand, recent data shows that domestic demand continues to weaken as monetary tightening weighs on financial conditions. The regulator also believes that inflation expectations and price behavior have begun to show signs of improvement.

The tightening of monetary policy has moved significantly closer to the level required to set the course for deflation, so the regulator has reduced the pace of tightening monetary policy, the press release said.

The Turkish lira exchange rate on the international Forex market did not show a noticeable reaction to the decision of the Central Bank of Turkey to raise the rate. As of 14:29 Moscow time, the USD/TRY pair was trading at 29.1515, adding 0.14%.

Economists polled by Reuters expect Turkish rates to rise slightly further in the first half of next year before being cut in the second half of the year once annual inflation begins its expected fall. The average forecast of the experts surveyed suggests that the Turkish Central Bank policy rate will be 45% by mid-2024, and then drop to 37.5% by the end of 2024.