The Central Bank suspended the interest rate hikes at the 3rd MPC meeting after the period when it adopted the Orthodox monetary policy perspective, but gave important messages to the markets with the emphasis it made on the fight against inflation. In previous meetings, move to the single funding instrument followed by additional tightening, the Central Bank added to its policy statement its commitment to keep monetary policy tight for a "long" period even though it did not raise interest rates, easing concerns about an early loosening cycle.
The Central Bank continues to gain credibility with the policy moves it has made under its new administration under the leadership of Mr. Naci Ağbal and its verbal guidance. Particularly, the details in the policy statement were important in terms of the perspective of the Central Bank against inflation. At this point, the emphasis on a long-term tightening approach indicates that the CBRT is also watching over upside inflation risks. The following months will be difficult in terms of inflation, and there may be an option to increase the interest rates compared to the peak point of annual inflation. With an expectation of a peak in April; We expect it to go up a little further due to past exchange rate increases, commodity and energy prices and food inflation. On the other hand, in terms of the decline in inflation; We anticipate the second half of the year as the base effect will work in our favor and seasonal conditions will improve. On the other hand, we are concerned that entering an early and hasty easing cycle will put the economy back into the currency and inflation spiral. This is why the emphasis on "prolonged tightening" in the policy statement is critical.
The CBRT's perspective was appreciated by the investors, as the most questionable issue, there was no direct reference to the additional tightening before that. The fact that the statement that additional monetary tightening will be made if necessary is included in the policy statement shows that the Central Bank is in a position to raise interest rates under necessary conditions. It also increases the confidence factor in terms of positioning in the right place against inflation.
The Central Bank has been building a good confidence with the perspective it has changed since the beginning of November and the new policies it has adopted. The policy guidance made so far is positive. For January 21 MPC decisions; We can interpret "a hawkish" perspective without a rate hike. The issue of not being rushed about the easing cycle is important to protect the economy from toxic effects. Longer-term emphasis, inflation perspective and additional tightening under necessary conditions were the main theme of this MPC meeting.
