The Summary of the CBRT's December Monetary Policy Meeting is Released
The Central Bank of the Republic of Turkey (CBRT) has shared the summary of the Monetary Policy Committee (MPC) meeting held on December 26, 2024. The summary highlighted the continued determination in the fight against inflation and emphasized that monetary policy tools would be effectively deployed in the event of a significant deterioration in inflation.
Central Bank lowers policy interest rate; inflation continues to decrease During the MPC meeting on December 26, 2024, the Central Bank of the Republic of Turkey (CBRT) decided to lower the policy interest rate from 50% to 47.5%. The Central Bank stated that this decision was made to support the decline in the main trend of inflation and to strengthen the disinflation process. It was also emphasized that interest rates would continue to be maintained at the level required by tight monetary policy.
The Central Bank noted that the increasing coordination with fiscal policies contributes to the fight against inflation, revealing that there are improvements in inflation expectations and a continued balancing of domestic demand. It was indicated that in the event of a significant deterioration in inflation, monetary policy tools would be used with determination.
Inflation on a downward trend In November, annual inflation fell to 47.09%, continuing its downward trend. The Central Bank reported that inflation continued to decrease in December, with noticeable improvements in the prices of core goods, services, and unprocessed food. The easing of supply-side pressures on fresh fruit and vegetable prices and the slowdown in rent inflation were highlighted as factors contributing to this positive outlook.
In November, the producer price index dropped to 29.47%, indicating a reduction in cost pressures on inflation. It was noted that price increases in the service sector slowed, while the monthly growth rates in services outside of rent remained at limited levels.
Global economy and financial conditions Global growth is expected to approach its historical average of 2.3% in 2025. However, it was stated that commodity prices are experiencing volatility due to geopolitical risks and imbalances in supply and demand. While a decline in global inflation continues, it has been observed that interest rate cuts in developed countries are proceeding cautiously.
Domestically, the downward trend in TL deposit and commercial loan interest rates continues, while individual credit growth has accelerated due to year-end campaigns. Changes concerning Currency Protected Deposits (KKM) accounts were emphasized as measures taken to support the transition to TL. The CBRT's gross reserves decreased to $156.2 billion, and Turkey's 5-year credit default swap (CDS) spread fell to 259 basis points.
Determination in monetary policy will continue The Central Bank stated that it will maintain a tight monetary policy until a significant improvement in inflation is achieved to align with the 5% target and will closely monitor developments in the credit market to take additional macroprudential measures if necessary. The committee emphasized that it would make decisions in a data-driven, transparent, and predictable manner.
The CBRT announced that it will continue to use all available tools with determination to ensure price stability.