The Central Bank of the Republic of Turkey (CBRT) held its Monetary Policy Committee (MPC) meeting today and announced the June interest rate decision. In March 2024, the CBRT unexpectedly raised the policy rate to 50% and paused further increases in the following months to observe the effects of this hike. As a result of the meeting, the interest rate remained at 50% with no changes.
Interest Rate Increase Was Not Expected
A change in the interest rate was not expected from today’s Monetary Policy Committee (MPC) meeting of the Central Bank of the Republic of Turkey (CBRT). In March, the CBRT took a significant step by raising the policy rate to 50% and paused further increases in the following months to observe the effects of this decision. While markets await the consumer price index (CPI) data for June to be released on July 3, they are also monitoring the CBRT’s expectations regarding the disinflation process.
It is worth recalling that the Minister of Treasury and Finance, Mehmet Şimşek, predicted that inflation would peak in May 2024 and then enter a disinflation process. In May, CPI data exceeded expectations with a monthly increase of 3.37% and an annual increase of 75.45%. This high inflation rate presented a concerning situation despite the 50% policy rate. These developments raise questions about the adequacy of current monetary and fiscal policies.
Current Status of the USD/TRY Exchange Rate
The dollar maintains its strength with expectations that the US Federal Reserve (FED) will delay interest rate cuts and the rise in US Treasury yields. The dollar index recently climbed to 106.08. At the time of writing, it was around 105.87.
Recently, the Turkish Lira has gained some strength against the dollar, but today the USD/TRY exchange rate briefly rose above 33 before falling back to around 32.91. Since today’s CBRT decision aligned with market expectations, it did not have a significant impact on the USD/TRY exchange rate.
