Central Bank set to meet for interest rate decision this week

Central Bank set to meet for interest rate decision this week

ANKARA

The Central Bank’s Monetary Policy Committee (MPC) will meet for a fifth time this year to decide on the one-week repo auction rate.

Economists widely expect the bank to keep the key interest rate unchanged at 50 percent on May 23 as it did at the MPC meeting in April.

In March, the bank unexpectedly delivered a 500-basis point rate hike to 50 percent from the previous 45 percent. With that surprising move, the bank has raised its key one-week repo rate by 4,150 basis points from 8.5 percent since June 2023.

Economists forecast that the bank’s policy rate will be 45 percent at the end of 2024.

All eyes are on the Central Bank as the government has vowed to bring rampant inflation under control. The annual inflation rate climbed from 68.5 percent in March to 69.8 percent in April.

Earlier this month, in its quarterly inflation report, the bank lifted its inflation forecast from a previous 36 percent to 38 percent for the end of 2024, while keeping inflation forecasts for 2025 and 2026 unchanged at 14 percent and 9 percent, respectively. The bank said it expected inflation to stabilize at 5 percent in the medium-term.

This month, Governor Fatih Karahan vowed that “they will definitely not allow a permanent deterioration in the inflation outlook.”

“We are determined to maintain our tight monetary policy stance until inflation falls to levels consistent with our target,” Karahan said on May 9, unveiling the quarterly report.

The positive results of the economic program the government is implementing are reflected in inflation expectations, Finance Minister Mehmet Şimşek said last week.

The inflation expectations for the end of 2024 declined from 44.16 percent in April to 43.64 percent in May, the Central Bank’s Survey of Market Participants showed on May 17.