While evaluating inflation concerns resulting from recent market events, Turkey’s central bank stated that it would take more steps if required to guarantee the seamless operation of financial markets.
Strong market volatility and a significant market sell-off were provoked by the incarceration of Istanbul Mayor Ekrem Imamoglu, President Tayyip Erdogan’s principal political adversary, which triggered the largest protests in Turkey in over 10 years last week.
According to a bank statement, the Monetary Policy Committee (MPC) reviewed financial market conditions in an interim meeting last week and adopted policies to support its strict monetary policy.
In the interim meeting, the bank increased its overnight lending rate to 46% and halted one-week repo auctions. According to a research note from Goldman Sachs, the central bank should hike its policy rate by 350 basis points “to show its ability and willingness to implement its disinflation program. ”
According to the Wall Street bank, the actions taken last week essentially increased its average cost of funding by 350 basis points and gave it more time to have internal discussions with other stakeholders before hiking the main repo rate.
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