ISTANBUL: Turkiye’s central bank held its key interest rate steady at 46% on Thursday, as expected, and also kept the upper band of its rate corridor at 49% despite predictions it would be lowered.
The central bank said inflation should continue to decline and growth should slow. The somewhat hawkish rates move effectively prolongs a policy pause ahead of an expected resumption of rate cuts that could come this summer.
“The tight monetary stance will be maintained until price stability is achieved via a sustained decline in inflation,” the bank’s policy committee said, repeating its past position.
“The underlying trend of inflation declined in May. Leading indicators suggest that this decline continues in June,” it added. “Data for the second quarter point to a slowdown in domestic demand.”
In April, the central bank hiked its policy rate to 46% from 42.5%, reversing an easing cycle that had begun in December following market volatility over arrest of Istanbul’s mayor in March.
The overnight funding rate was also hiked by 700 basis points since the mayor was arrested, but in the last week it has dipped to near the policy rate in what analysts said was a signal the bank was preparing the ground for eventual rate cuts.
In a Reuters poll, economists had expected the central bank to keep the one-week repo policy rate steady but cut the overnight lending rate - the upper band - by 150 basis points to 47.5%. Instead, it was held at 49%.
In May, the central bank held its year-end inflation forecast steady at 24% and vowed to tighten policy if inflation worsens. Annual inflation declined to 35.4% last month.
Comments
Comments are closed for this article.