The Turkish Central Bank has decided to keep interest rates in Turkey unchanged at 46% despite recent positive inflation data, which in May fell for the 12th consecutive month to 35.41%, even below market expectations, which had predicted a CPI of over 36% for last month.
According to breaking news published by Turkish media outlets, at the meeting held by the Monetary Policy Committee of the Central Bank of the Republic of Turkey (TCMB, for its acronym in Turkish), it decided to keep the interest rate on one-week repo auctions – which is the official interest rate – at 46%, while the interest rate on overnight loans also remains at 49%.
The decision, which is in line with economy analysts’ expectations, was taken despite the bank’s indication that the trend towards disinflation will continue in June, according to available data. However, in its statement, the Monetary Policy Committee insists that high interest rates will be maintained until a permanent decline in inflation and lasting price stability are achieved.
“Core inflation declined in May. Preliminary data indicate that the decline in core inflation will continue in June. Second quarter data indicate that domestic demand has slowed. The possible effects of geopolitical developments and the rise of protectionism in global trade on the disinflation process are being closely monitored. Inflation expectations and price behaviour remain risk factors for the disinflation process,” the statement explained, assuring that “if there is a significant and permanent deterioration in inflation, all monetary policy instruments will be used effectively.”
At its previous meeting in mid-April, the Turkish Central Bank decided to raise interest rates for the first time in 13 months, increasing them to 46% after reducing them to 42.5% in early March, in view of the risks to the disinflation process in Turkey. The next meeting of the Monetary Policy Committee is scheduled for 24 July.
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Edited and reviewed by:
Pablo Gómez is a specialist in Turkey and has been editor-in-chief of Hispanatolia since 2011. He has been analysing current affairs and geopolitics in Turkey and the surrounding region since 2006.
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