ISTANBUL: Turkiye’s central bank kept its main interest rate steady at 50% on Thursday as expected and reiterated that it remains highly attentive to inflation risks, adding that liquidity conditions are being closely monitored.
The bank last raised rates in March by 500 basis points, citing a deterioration in the inflation outlook. It held steady in April and May, vowing to tighten policy more if the outlook worsens.
In total, the bank has raised its policy rate by 4,150 basis points since June last year in a tightening cycle that reversed years of monetary stimulus championed by President Tayyip Erdogan to boost economic growth.
The bank said its tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the projected forecast range.
“In case of unexpected developments in credit and deposit markets, the monetary transmission mechanism will be supported via additional macroprudential measures,” it also said in a statement following its monetary policy committee meeting.
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The lira was little changed at 32.8715 against the dollar after the announcement, firmer than the 33.03 level that it hit earlier this week.
The government has said the new policies will help bringing inflation down from current levels, having hit 75.45% in May, while facilitating improvement in the country’s chronic current account deficit.
Earlier this month, Central Bank Governor Fatih Karahan said headline inflation will start declining as of June, alongside cooling domestic demand and tight policy conditions. The bank forecasts year-end inflation of 38%, compared with market forecasts of around 42%.
All 11 respondents in a Reuters poll expected the bank to keep its policy rate steady in June. A rate cut is not expected until near year-end or the first quarter of next year.
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