Turkey Central Bank Maintains Status Quo

Turkey’s central bank left its key interest rate unchanged for the sixth straight meeting despite high inflation and persistent risk to the currency.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey, headed by Sahap Kavcioglu, decided to hold the one-week repo rate at 14.00 percent.

Consumer price inflation had soared to 73.5 percent on food prices in May, the highest since 1998.

The central bank said the MPC expects disinflation process to start on the back of measures taken and decisively implemented for strengthening sustainable price and financial stability along with the decline in inflation owing to the base effect and the resolution of the ongoing regional conflict.

Under pressure from President Tayyip Erdogan, the bank had lowered the rate by 500 basis points since September 2021.

High inflation, falls in the lira and aggressive monetary tightening elsewhere are clearly not enough to persuade Turkey’s central bank to lift interest rates, Capital Economics economist Jason Tuvey, said.

Disorderly falls in the lira are a major risk, which would probably be met with capital controls rather than rate hikes, the economist added.

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