Turkey’s Central Bank leaves key rates on hold, in line with expectations

ANKARA

The Central Bank kept its main interest rates steady on June 15, in line with market expectations. 

The Bank kept its closely watched late liquidity window at 12.25 percent and its benchmark repo rate on hold at 8 percent, saying it would stick to a tight policy stance until the inflation outlook significantly improved. 

All 16 economists polled by Reuters had predicted the Bank would leave the repo rate unchanged, as well as the overnight lending rate, at 9.25 percent, and the overnight borrowing rate, at 7.25 percent. Those rates were also unchanged.

The Central Bank said it would continue to use all available instruments in pursuit of the price stability objective. 

“Tight stance in monetary policy will be maintained until inflation outlook displays a significant improvement. Inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered,” it said in a release. 

“Although recent improvements in cost factors and expected partial correction in food prices will contribute to disinflation, current elevated levels of inflation pose risks on the pricing behavior,” it also noted.
 
Inflation remained near an 8.5-year high last month, hitting 11.72 percent, according to the latest official data. 

Recently released data indicate that the recovery in the economic activity has gained pace, the Central Bank also said. 

“Domestic demand conditions have improved and demand from the EU economies continues to contribute positively to exports. Economic activity is expected to further accelerate due to the supportive measures and incentives provided recently,” it added. 

The Monetary Policy Committee assessed that the implementation of the structural reforms would contribute to the potential growth significantly, according to the release.