MÜSİAD President Abdurrahman Kaan released a written statement regarding the interest rate hike carried out by the Central Bank.

President Kaan made the following statements in his statement:

“As will be recalled, the increase in consumer prices for the February 2021 period had seen the peak of the last 19 months at %15.61, while the increase in domestic producer prices had seen the peak of the last 21 months at %27.09. In this period, core inflation indicators had also signalled that the rise in inflation would continue. At the same time, we had seen that the Turkish lira was also under pressure recently due to the rise in global bond yields. In the light of these developments, an interest rate hike decision by the Central Bank of the Republic of Türkiye was regarded as certain by the markets and positions were being taken accordingly. 

Of course, this increase, which was well above the estimates concentrated around 100 basis points, was not a development the markets expected. At this point, since price increases originating from global markets, primarily in food and commodities, remain outside the sphere of influence of the Central Bank of the Republic of Türkiye, we are of the opinion that carrying on the fight against inflation solely with the policy rate instrument will not be sufficient.

With the front-loaded interest rate increase materializing at a level well above market expectations on this path, which the CBRT entered as a requirement of the conjuncture and in fact as a result of both the expectation management that forms the basis of central banking and the policy of improving Türkiye's CDS premiums, it will be necessary to see what course the steps to be taken from now on will follow in terms of the business world's investment enthusiasm and debt restructuring.

It is understandable that, in the face of the increasing dollar supply in the world following a USD 1.9 trillion American stimulus package, emerging markets take a positive share of this flow and resort to policies supporting the appreciation process of their own currencies. However, there are two important issues here: the effect of the high interest rate on demand in the domestic market and finding an appropriate USD/TRY level for foreign trade to operate positively in terms of the current balance.

Another expectation is the steps the Central Bank will take on the management of dollarization and when the dollar purchase auctions will begin. As the business world, while we carry these concerns, we hope that the decision taken will bring positive results, particularly in foreign markets, in terms of the CBRT's independence and its governance reputation.

In the end, this is a temporary process, and we would like to evaluate it as a cyclical necessity applied so that, together with reassuring data for meeting the inflation targets, the interest rate reduction process can this time be achieved permanently.

As MÜSİAD, we hope that additional steps will be taken so that the policy rate, which has risen to the level of %19 with this increase, does not suppress the vitality in economic activity, as in the examples of the removal of the limit on the number of instalments in housing sales and the easing of the limit in automobile sales in recent days. 

The Reform Package announced by our President Mr. Recep Tayyip Erdoğan will also ease the hand of the real sector in keeping the direction of the economy positive. As we stated in the remarks we made following the announcement of the reforms, it is gratifying for the business world that our greatest priority in the new period is price stability. In this context, we attach great importance to the fact that the Price Stability Committee will be established in order to assess the structural shocks that create a risk to inflation and to determine and manage the necessary policies; and we emphasize the importance of engaging in an all-out fight against inflation in order to achieve permanent price stability.”