Turkish central bank keeps 50 pct interest rate unchanged for seventh time

Duvar English

Turkey's Central Bank on Oct. 17 decided to keep the policy interest rate at 50 percent.

In an effort to control inflation crisis after the last elections, the economy administartion led by Treasury and Finance Minister Mehmet Şimşek adopted a U-turn and began to apply rate hikes.

Following the presidential elections in May 2023, the Central Bank raised the interest rate by a total of 4,150 basis points until March 2024. The last increase occurred in March when the policy rate was set at 50 percent, and it has remained unchanged for the past seven months.

In its latest press release, the bank indicated a slight uptick in the underlying trend of inflation for September. The bank noted that indicators for the third quarter show domestic demand is continuing to slow, nearing disinflationary levels.

While inflation in core goods remains low, the bank anticipates improvements in services inflation by the last quarter of the year. However, the bank cautioned that uncertainty surrounding the pace of inflation improvement has risen, particularly in light of recent data.

Turkey's official statistics institution reported a monthly inflation rate of 2.97 percent in September, with the annual inflation rate dropping to 49.38 percent.

The bank highlighted that inflation expectations and pricing behavior continue to pose risks to the ongoing disinflation process. "These factors could complicate efforts to stabilize the economy" as the bank navigates the challenges of balancing growth with inflation control.

The bank emphasized its vigilance regarding inflation risks while explaining their decision to keep the policy rate unchanged. "The tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed," the bank noted.

The bank also reiterated its medium-term inflation target of five percent.