MÜSİAD President Abdurrahman Kaan issued a written statement regarding the interest rate hike implemented by the Central Bank. Chairman Kaan made the following statement:

“As you may recall, consumer price increases for February 2021 reached a 19-month high of 15.61%, while domestic producer price increases reached a 21-month high of 27.09%. During this period, core inflation indicators signaled that the rise in inflation would continue. We also observed that the Turkish Lira was under pressure due to the recent rise in global bond yields. In light of these developments, markets considered the Central Bank of the Republic of Turkey's interest rate hike decision to be a certainty and were taking a position accordingly.

Of course, this increase, which was well above the forecasts centered around 100 basis points, was not a development the markets were expecting. At this point, we believe that continuing the fight against inflation solely with the policy rate instrument will not be sufficient, as price increases originating from global markets, particularly food and commodities, are outside the Central Bank's sphere of influence.

The measures taken in response to the prevailing circumstances, which in fact affect both the Central Bank and the Central Bank, With the front-loaded interest rate hike significantly exceeding market expectations, a result of both the expectations management that underpins banking and Türkiye's policy of improving CDS premiums, it remains to be seen how future steps will play out in terms of the business world's investment enthusiasm and debt restructuring.

It's understandable that, following the $1.9 trillion US stimulus package, emerging markets have benefited from the increasing global dollar supply and implemented policies to support the appreciation of their currencies. However, two key issues remain: the impact of high interest rates on demand in the robust domestic market and the establishment of an appropriate USD/TRY exchange rate to ensure positive foreign trade performance for the current account balance.

Another expectation is the Central Bank's steps regarding dollarization management and the timing of dollar purchase auctions. While the business community shares these concerns, we hope this decision will yield positive results, particularly in terms of the CBRT's independence and governance reputation in international markets.

Ultimately, this is a temporary process and provides a welcome relief for the achievement of inflation targets. Along with the data, we would like to consider the interest rate reduction process as a cyclical necessity, implemented to ensure it is permanent this time.

As MÜSİAD, we hope that additional steps will be taken, such as the recent removal of the number of installment limits on housing sales and the easing of the limit on automobile sales, to ensure that the policy interest rate, which has risen to 19% due to this increase, does not suppress the vibrancy of economic activity.

The Reform Package announced by our President, Mr. Recep Tayyip Erdoğan, will also provide relief to the real sector in maintaining a positive economic trajectory. As we stated in our statements following the announcement of the reforms, the fact that price stability is our top priority in the new period is pleasing to the business world. In this context, we attach great importance to the establishment of a Price Stability Committee to assess structural shocks that pose a risk to inflation, to determine and manage the necessary policies, and we emphasize the importance of engaging in an all-out fight against inflation to achieve lasting price stability.