As widely expected, Türkiye’s Central Bank has decided to keep its key interest rates unchanged, extending its monetary policy pause for a fourth consecutive meeting.
At its fifth meeting of the year chaired by Governor Fatih Karahan, Monetary Policy Committee (MPC) on July 23, held the policy rate, the one-week repo auction rate, constant at 37 percent.
It also maintained the overnight lending rate and the overnight borrowing rate at 40 percent and 35.5 percent, respectively.
In an accompanying statement, the committee reiterated that the tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels.
“The committee will determine the policy rate by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets,” said the statement.
In case of a significant and persistent deterioration in the inflation outlook, monetary policy stance will be tightened., it added. The committee said it remains highly attentive to upside risks on inflation.”
The underlying trend of inflation decreased slightly in June, said the committee but warned that leading indicators suggest that the underlying trend will rise temporarily in July.
Türkiye’s annual inflation rate eased from 32.61 percent in May to 32.11 percent in June with consumer prices rising 0.9 percent month-on-month.
As a result of the growing uncertainty amid geopolitical developments, energy prices started trending up again, while recent data confirm the ongoing weakening in domestic demand, it noted.
The impact of geopolitical developments on the inflation outlook through the cost channel, economic activity and expectations is closely monitored, said the committee.
Monetary policy decisions are made prudently on a meeting-by-meeting basis with a focus on the inflation outlook, it noted.
“In case of unanticipated developments in credit and deposit markets, monetary transmission mechanism will be supported via additional macroprudential measures,” said the statement.
Liquidity conditions will continue to be closely monitored and liquidity management tools will continue to be used effectively, it added.
The next MPC meeting is scheduled for Sep. 10. The committee will convene again on Oct. 22 and Dec. 10.
