The Monetary Policy Committee of the Turkish Central Bank announced a reduction in the one-week repo auction rate from 47.5% to 45%.

This decision comes in response to recent trends in inflation, which showed a decrease in December but are expected to rise in January.

In its statement, the bank noted that the decline in December's underlying inflation trend was offset by projections of an increase in January, driven particularly by services with time-dependent pricing and backward indexation. Despite this, core goods inflation remains relatively subdued, and indicators from the last quarter suggest a disinflationary domestic demand environment.

The statement emphasized the bank's commitment to a tight monetary policy, stating: "The decisiveness regarding the tight monetary stance is strengthening the disinflation process through moderation in domestic demand, real appreciation in the Turkish lira, and improvement in inflation expectations."

The Central Bank underscored the importance of fiscal policy coordination and vowed to maintain the tight monetary stance until a sustained decline in inflation leads to price stability. Future policy rates will be set to align with the disinflation path, considering both realized and expected inflation rates.

The statement also highlighted the readiness to employ additional macroprudential measures should there be significant and persistent deviations in credit and deposit markets. Liquidity conditions will be closely monitored, with sterilization tools at the ready to manage any adverse effects.

Looking forward, the Central Bank aims to utilize all monetary policy tools decisively to achieve a medium-term inflation target of 5%. The Committee reiterated that its decisions would be made in a predictable, data-driven, and transparent manner, focusing on the inflation outlook.

The summary of the Monetary Policy Committee Meeting is set to be released within five working days from today. (ILKHA)