Turkish central bank keeps interest rate steady at 50%
A man walks past Turkish central bank in Ankara, Türkiye, on Nov. 23, 2023. (Xinhua Photo)
The central bank’s Monetary Policy Committee (MPC) has decided to maintain the benchmark interest rate at 50%, signaling its ongoing cautious stance amid rising inflationary pressures. The decision, announced on Thursday, comes as the country grapples with economic challenges and uncertainty surrounding inflation trends.
Interest rates held at 50% amid inflationary uncertainty
In its statement, the central bank indicated that while inflation saw a slight uptick in September, domestic demand is gradually slowing down, which is expected to support inflation reduction in the near future.
“The third-quarter indicators imply that domestic demand is approaching levels that will support the disinflationary process,” the statement read.
Despite improvements in core goods inflation, service inflation is expected to improve only by the last quarter. The committee noted the uncertainty surrounding the speed of the improvement in inflation, citing recent data as the reason for this unpredictability.
Inflation risks remain, cautious stance reiterated
The MPC emphasized that inflation expectations and pricing behaviors continue to pose risks to the country’s disinflationary process. The bank maintained its “determined stance” on monetary policy, highlighting the role of domestic demand balancing, real appreciation of the Turkish lira, and improving inflation expectations in reducing inflation.
“Monetary policy will remain tight until a clear and lasting decline in the main trend of monthly inflation is achieved and inflation expectations converge within the projected range,” the committee reiterated.
Tight monetary policy to continue
The central bank stated that the current cautious approach will persist, particularly in addressing the upward risks to inflation. The tight stance will continue until a permanent improvement in inflation expectations and monthly inflation figures is observed.
“If a significant and permanent deterioration in inflation is anticipated, monetary policy tools will be employed effectively,” the committee warned.
The MPC also highlighted the importance of strengthening the monetary transmission mechanism through additional macroprudential measures if necessary, and announced that liquidity conditions will be closely monitored, with sterilization tools being used effectively as needed.
