The Central Bank kept the policy rate unchanged at 50 percent. In the text of the decision, it was stated that the tight monetary policy stance will be maintained until a significant and permanent decline in the underlying trend of inflation is achieved, and the monetary policy stance will be tightened in case of a deterioration.
The Monetary Policy Committee (MPC) of the Central Bank of the Republic of Turkey (CBRT) announced its interest rate decision. The Committee decided to keep the policy rate (one-week repo auction rate) unchanged at 50%.
In the text of the decision, it was stated that the weakening in the underlying trend of monthly inflation was temporarily interrupted in May and recent indicators confirm that domestic demand has slowed down, albeit still at inflationary levels. “The high course and rigidity in services inflation, inflation expectations, geopolitical risks and food prices keep inflationary pressures alive. The Committee closely monitors the alignment of inflation expectations and pricing behavior with projections. The effects of monetary tightening on loans and domestic demand are closely monitored. Considering the lagged effects of the monetary tightening, the Committee decided to keep the policy rate unchanged, yet reiterated its cautious stance against upside risks to inflation.
The tight monetary policy stance will be maintained until the underlying trend of monthly inflation displays a significant and lasting decline and inflation expectations converge to the projected forecast range. In case of a significant and permanent deterioration in inflation, the monetary policy stance will be tightened. The decisive monetary policy stance will bring down the underlying trend of monthly inflation and disinflation will be established in the second half of the year through rebalancing in domestic demand, real appreciation in the Turkish lira and improvement in inflation expectations.”
In case of unanticipated developments in credit and deposit markets, the monetary transmission mechanism will be supported by additional macroprudential steps and liquidity developments are closely monitored. It was stated that sterilization tools would be diversified and used effectively when necessary.
According to the text, the Committee will make its policy decisions by taking into account the lagged effects of monetary tightening, in a way to provide monetary and financial conditions that will reduce the underlying trend of inflation and bring inflation to the 5-percent target in the medium term. Indicators for inflation and underlying inflation will be closely monitored and the Committee will use all available tools decisively in line with the main objective of price stability.
The Committee will take its decisions in a predictable, data-driven and transparent framework.
