CBRT Adjust Monetary Policy Framework

Highlights from the policy statement:

• The Committee has also decided to adjust the monetary policy operational framework by setting the Central Bank overnight borrowing and lending rates 300 basis points below and above the one-week repo auction rate, respectively.
• Tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the projected forecast range.
• Monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen.
• Stickiness in services inflation, inflation expectations, geopolitical risks, and food prices keep inflation pressures alive

See the full statement here.

USD/TRY dipped immediately following the 500bp hike, last dealing at around 32.00. The decision, while against overall consensus of unchanged rates, had been flagged as a risk by some analysts. Most pertinent in the statement is the implementation of a new framework, creating a rate channel +/-300bp around the one-week repo rate.