The summary of the meeting of the Monetary Policy Committee on March 23 was published.
In the summary, it was emphasized that consumer prices increased by 3.15 percent monthly in February, while annual inflation decreased by 2.50 percentage points to 55.18 percent, and it was stated that annual inflation fell in all groups, especially in energy.
When analyzed on a monthly basis, it is stated that food and services groups stand out with price increases, and it was reported that the increase in producer prices was limited with the support of the significant decrease in energy prices, and the decline in annual producer inflation continued in February.
In the summary, it was stated that energy prices increased by 0.64 percent in February, while the group’s annual inflation decreased by 5.02 points to 50.01 percent. Following the developments in propane and butane prices, cylinder gas prices diverged from the general trend.” expressions were used.
Despite the fact that the recently announced data on economic activity has been at more positive levels than expected, it was stated that recession concerns continue in the economies of developed countries with the effect of geopolitical risks and interest rate hikes.
“Although the negative effects of supply constraints in some sectors, especially in basic food, have been reduced thanks to the strategic solution tools developed by Turkey, producer and consumer inflation continues at high levels on an international scale. The effects of high global inflation on inflation expectations and international financial markets are closely monitored. Countries Although the divergence in the monetary policy steps and communications of the central banks of developed countries continues due to the differing economic outlook between the two countries, coordinated steps are taken to prioritize financial stability with swap agreements and new liquidity opportunities.
Financial markets reflect expectations that central banks will soon end their rate hike cycles. In parallel with the decline in the global risk appetite in portfolio flows to developing countries, outflows from both debt and stock markets were observed in March. However, the volatility in the long-term bond rates of developed countries and the course of global financial conditions keep the risks regarding portfolio flows to developing countries alive.
In the summary, it was stated that while international commodity prices declined in February, this development was driven by the energy and industrial metal sub-indices, while the agriculture sub-index rose slightly.
In the summary, it was emphasized that the decline in international natural gas prices continued in March due to the moderate weather conditions as well as the significant increase in gas stocks, and it was stated that in line with this outlook, natural gas industry tariffs were also revised downwards in March.
“With the support of the implemented policies, improvements in the level of inflation began to be seen”
In the summary, it was noted that international transportation costs maintained their downward trend in February, and the stable course observed in the exchange rate in recent months continued.
Under this outlook, it is stated that the increase in producer prices slowed down compared to January and the downward trend in annual producer inflation continued. ” assessment was included.
In the summary, it was noted that the Gross Domestic Product (GDP) data for the last quarter of 2022 pointed to a quarterly recovery in economic activity despite the limited decline in annual growth compared to the third quarter.
“In this period, GDP increased by 3.5 percent on an annual basis, and increased by 0.9 percent compared to the previous quarter in seasonal and calendar adjusted terms. Thus, the overall growth in 2022 was 5.6 percent. Net exports and investments increased by 5.6 percent throughout the year. Its share in national income was above historical averages. Machinery-equipment investments, one of the sub-items of investments, carried the upward trend on an annual basis to the thirteenth quarter. In the last quarter of 2022, the highest contribution to growth came from domestic demand, while the effects of weak foreign demand were reflected in the contribution of the industrial sector to growth.
Leading indicators before the disaster of the century pointed out that in the first quarter of 2023, domestic demand was more lively than foreign demand and the growth trend was on the rise. In January, adjusted for seasonal and calendar effects, industrial production increased by 1.9 percent on a monthly basis and by 7 percent on an annual basis. Thus, industrial production increased by 2.6 percent on a quarterly basis as of January. In January, the retail sales volume index increased by 5.4 percent on a monthly basis. The horizontal course in the registered export orders of the manufacturing industry companies on a quarterly basis, together with the increase in the registered domestic market orders confirms that the domestic demand is more lively than the foreign demand.
In the summary, it is stated that there is an uncertainty over the indicators related to economic activity after the earthquake disaster, “In addition to the direct effects of the earthquake, indirect effects through reconstruction activities and supportive policies will have various sectoral and regional reflections that change over time. The effects of the earthquake on production, consumption, employment and expectations. thoroughly evaluated.” expressions were used.
“The data show that the upward trend in employment was maintained after the earthquake”
In the summary, it was noted that high-frequency foreign trade data for March indicated that exports from the earthquake-affected region showed a recovery trend following the post-disaster decline, and the following evaluations were made:
“Similarly, high-frequency data on the labor market suggest a recovery in the following weeks despite a limited loss of momentum in job postings and applications across the country after the earthquake. It is observed that the expenditures made by the card are slightly below the pre-earthquake trend in the disaster area. detailed information indicates that the industrial production infrastructure in the earthquake-affected region is largely preserved and the continuity of production is ensured.
Although the earthquake is expected to affect the economic activity in the near term, it is expected that it will not have a permanent effect on the performance of the Turkish economy in the medium term. Seasonally adjusted employment increased by 0.8 percent (264 thousand people) in January 2023 compared to the previous month, and by 1.2 percent (377 thousand people) on a quarterly basis. In seasonally adjusted terms, the labor force participation rate remained flat compared to the previous month and was realized as 54.1 percent, while the unemployment rate decreased by 0.6 percentage points compared to the previous month and fell to 9.7 percent. Survey indicators and high-frequency data show that the upward trend in employment was maintained, although it lost some momentum after the earthquake.
In the summary, it was stated that the continued increase in services revenues continued to support the current account balance despite the increase observed in the foreign trade deficit due to the acceleration in gold imports.
In the summary, it was also emphasized that the domestic consumption demand, high level of energy prices and weak economic activity in the main export markets kept the risks on the current account alive, and it was reminded that the permanent current account balance at sustainable levels is important for price stability.
“The effects of the earthquake in the first half of 2023 will be closely monitored”
Reminding that the monetary policy stance will be determined with a cautious approach, taking into account the source and permanence of the risks to the inflation outlook and the extent to which they can be controlled by monetary policy, the summary emphasized the following:
“In line with the goal of sustainable price stability in monetary policy, a liraization-oriented approach that also takes into account the risks to financial stability will continue to be exhibited. The growth rate of loans and the meeting of the financing resources accessed with economic activity in line with its purpose are closely monitored. will prioritize the creation of appropriate financial conditions to support the necessary transformation.In this framework, in addition to the existing supportive measures, updating the tools that support liquidity conditions, shared in the text of the Monetary Policy and Liraization Strategy for 2023, when necessary, has been taken into consideration.
Supporting financial conditions became even more important after the earthquake in terms of sustaining the acceleration in industrial production and the increasing trend in employment. In this context, the Board decided to keep the policy rate constant. The Committee is of the opinion that the monetary policy stance is sufficient to support the necessary recovery after the earthquake by maintaining price and financial stability. The effects of the earthquake in the first half of 2023 will be closely monitored.
In the summary, it was underlined that the CBRT will implement the Liraization Strategy with all its elements in order to institutionalize price stability in a permanent and sustainable manner, and said, “As stated in the 2023 Monetary Policy and Liraization Strategy text, the Board will continue to use the tools that will support the effectiveness of the monetary transmission mechanism with determination and will continue to use the funding resources. It will align the entire policy toolkit, especially channels, with liraization targets.” evaluation was made.
In the summary, it is noted that policy instruments are focused on supporting the development of Turkish lira deposits, increasing Turkish lira denominated assets in the collateral structure of Open Market Operations funding, reducing the weight of currency swaps in the composition of funding, and strengthening foreign exchange reserves. It was reported that the trend of the yield curve in the direction of the efficiency of monetary transmission with the increase in the demand for assets was closely monitored.
In the summary, it was stated that the Board will oversee the development of the financing costs of loans that provide efficiency gains in targeted areas, together with the growth rate of loans, in a way that will ensure the protection of transfer:
In this context, the effects of developments in Turkish lira liquidity and distribution on deposit and loan pricing, the effects of exchange rate developments on inflation, the effects of developments on currency-protected deposit products on reverse currency substitution, the depth and stability of foreign exchange markets, and price stability are analyzed and the necessary policy is made. In line with its main objective of price stability, the CBRT will resolutely continue to use all the tools at its disposal until strong indicators pointing to a permanent decline in inflation emerge and the medium-term 5 percent target is reached.
The stability to be achieved in the general level of prices will positively affect macroeconomic stability and financial stability through the decrease in country risk premiums, the continuation of reverse currency substitution and the upward trend in foreign exchange reserves, and the permanent decline in financing costs. Thus, a suitable ground will be created for the continuation of investment, production and employment growth in a healthy and sustainable way.
In the summary, it was stated that the Board supported the creation of a holistic macro policy mix that includes all stakeholders with strong policy coordination in order to ensure price stability, and that it will continue to take its decisions in a transparent, predictable and data-oriented framework.
