MNI CBRT Review - February 2024: New Governor But a Familiar Stance

Executive Summary:

• The Central Bank of Turkey held its policy rate at 45%, with new Governor Fatih Karahan maintaining the more hawkish tone as set out in previous comments.
• The central bank stated that rates will be maintained at their current levels until a there is a significant decline in the trend of monthly inflation.
• Karahan reiterated the Monetary Policy Committee’s commitment to making decisions according to a “predictable, data-driven and transparent framework.”

See the full review, with a summary of sell-side analyst views, here:

MNICBRTRevFeb24.pdf

The Central Bank of Turkey kept the one-week repo rate unchanged at 45%, in-line with unanimous sell-side consensus. The central bank stated again that current levels of policy will be maintained until there is a significant decline in monthly inflation, leaving the door open to reassess should inflationary threats re-emerge. Overall, Governor Karahan struck a familiar tone to his predecessor.

The previous statement was more explicit in suggesting that there will be no further hikes. Furthermore, while the threat of re-emerging inflation risks has been flagged in both statements, the February edition states that policy will be “tightened” if necessary while the January statement made a less-committal pledge to only “reassess" the stance of monetary policy. Overall, these are minor, but nonetheless noteworthy, tweaks which are in-line pre-decision speculation that Karahan would lean marginally more hawkish than Erkan. Additionally, the policy statement for the first time referenced the role of monetary policy on the appreciation process of the lira, which they note is a key element of disinflation.