Central Bank keeps policy rate unchanged at 8.5 pct

ANKARA

Türkiye’s Central Bank has decided to keep its policy rate -one-week repo auction rate- unchanged at 8.5 percent.
Members of the bank’s Monetary Policy Committee (MPC) met on April 27 for the fourth time this year to discus the key rates.

“The committee assessed that the current monetary policy stance is adequate to support the necessary recovery in the aftermath of the earthquake by maintaining price stability and financial stability,” the bank said in a statement released after the MPC meeting.

The effects of the earthquake in the first half of 2023 will be closely monitored, it added.

Powerful earthquakes jolted several provinces in Türkiye’s south in early February, killing more than 50,000 people, causing substantial material damage.

“While the earthquake is expected to affect economic activity in the near term, it is anticipated that it will not have a permanent impact on performance of the Turkish economy in the medium term,” read the MPC statement.

“Leading indicators show that the economic activity in the earthquake zone has been recovering faster than expected.”

The committee said it will prioritize the creation of supportive financial conditions in order to minimize the effects of the disaster and support the necessary recovery.

“While level and underlying trend of inflation have been improved with the support of the implemented integrated policy approach, the effect of earthquake-driven supply-demand imbalances on inflation is closely monitored,” it said.

The bank reiterated that it will continue to use all available instruments decisively until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is achieved.

The annual inflation rate slowed from 55.2 percent in February to 50.5 percent in March, according to the latest official data.

“While share of sustainable components of economic growth remains high, the stronger-than-expected contribution of tourism revenues to the current account balance continues throughout the year,” the statement added. However, the committee warned that domestic consumption demand, high level of energy prices and the weak economic activity in main trade partners keep the risks on current account balance alive.

The MPC’s next meeting is scheduled for May 25, after the May 14 presidential and parliamentary elections.