Turkish central bank keeps rates steady for a sixth straight month

Reuters

Turkey's central bank held its main interest rate steady at 50% for a sixth straight month on Sept. 19 as expected, saying it remained highly attentive to inflation risks but removing a reference to potential tightening.

The bank said "monetary policy tools will be used effectively in case a significant and persistent deterioration in inflation is foreseen." In previous statements it had said its policy stance will be tightened if such a deterioration in inflation is foreseen.

The lira was little changed at 34.02 against the dollar after the decision.

The last time the bank raised its policy rate, opens new tab was in March, when it hiked by 500 basis points to round off an aggressive tightening cycle that started in June last year to tame soaring inflation.

Since then it had kept the one-week repo rate on hold while pledging to tighten further if the outlook worsens. A Reuters poll showed analysts expect the bank to make its first rate cut around November.

All 16 poll respondents in the poll expected the bank to leave the policy rate unchanged this week, with it seen dipping to 47% by year end according to the median estimate.

The poll showed it could move as soon as October or as late as next year and it is seen lowering the rate by more than 20 percentage points by the end of 2025.

Annual inflation dropped below 52% in August from a peak of 75% in May and the government forecasts it will fall below 42% by year end before reaching 17.5% by end-2025.

The central bank has lifted its policy rate by 4,150 basis points since June 2023, reversing years of monetary stimulus backed by President Tayyip Erdogan to boost economic growth.