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CBRT-Tight monetary stance will serve as a significant buffer

The tight monetary stance will serve as a significant buffer against external and temporary volatilities in the context of inflation expectations, pricing behavior and financial market developments, said in the Summary of the Monetary Policy Committee Meeting released by the Central Bank of the Republic of Turkey (CBRT) on Tuesday.

NEWS IN ENGLISH 11.05.2021, 14:51
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CBRT-Tight monetary stance will serve as a significant buffer
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The monetary policy stance would be set taking into account the upside risks to the inflation outlook and with a focus on bringing inflation down permanently in a cautious manner and achieving the price stability target, said in the Summary, and added:


"Accordingly, the policy stance will continue to be determined by taking into account inflation developments and inflation expectations, and at a degree of tightness that will restore the disinflation process as soon as possible and ensure its sustainability until the medium-term targets are achieved."


Demand and cost factors, supply constraints in some sectors, and high levels of inflation expectations continued to pose risks to the pricing behavior and inflation outlook, it said, adding that the decelerating impact of the monetary tightening on credit and domestic demand has begun to be observed. 


"Taking into account the high levels of inflation and inflation expectations, the current monetary policy stance will be maintained until the significant fall in the April Inflation Report’s forecast path is achieved. Accordingly, the Committee has decided to maintain the tight monetary policy stance by keeping the policy rate unchanged at 19 percent" read the Summary.
The CBRT would continue to use decisively all available instruments in pursuit of the primary objective of price stability, with the policy rate will continue to be determined at a level above inflation to maintain a strong disinflationary effect until strong indicators point to a permanent fall in inflation and the medium-term 5.0 percent target is reached.


"The stability in the general price level will foster macroeconomic stability and financial stability through the fall in the country risk premium, the reversal in currency substitution, accumulation of foreign exchange reserves and perpetual decline in financing costs. This would create a viable foundation for investment, production and employment to continue growing in a healthy and sustainable way" read the Summary, and went on as follows:


"Demand and cost-side effects remain significant for inflation given credit market and economic activity indicators, as well as exchange rate volatility and developments in import prices. Consumer loans, along with commercial loans, exhibit a milder course, and the durability of this development is monitored for macroeconomic stability. 


"The outlook for domestic demand, international prices and global risk appetite heighten the risks arising from external financing needs to the balance of payments. In formulating the monetary policy towards the target of price stability, the Committee will continue to follow an approach that also addresses the risks to financial stability.


"The Committee reiterated its judgement that in order to achieve price stability, a strong policy coordination and a holistic macro policy mix involving all stakeholders are required."
 

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