Turkey's Central Bank holds policy rate constant

ANKARA- Anadolu Agency

The Central Bank of Turkey on April 25 kept its one-week repo rate - also known as the policy rate - constant at 24 percent.

“Recently released data show that the rebalancing trend in the economy has continued,” the bank said.
The decision came in a statement from the bank’s Monetary Policy Committee (MPC) meeting - the third of eight meetings scheduled for 2019.

“External demand maintained its relative strength while economic activity showed sluggish pace, partly due to tight financial conditions.”

In a Tweet on April 24, Treasury and Finance Minister Berat Albayrak commented that the positive effects of the rebalancing process are felt in the fields of industrial production and real sector confidence.
“As we implement the measures regarding the structural transformation, the outlook in industrial production, manufacturing sector capacity utilization and real sector confidence will further improve,” he added.

Data from the Turkish Statistics Institute (TÜİK) showed on April 24 that the Turkish manufacturing industry’s capacity utilization rate climbed 0.7 percentage points month-on-month to reach 75 percent in April.
Separate data, released also on April 24, showed that the business confidence index increased by a strong 3.3 percent on a monthly basis to touch 105.5 in the month.

“The current account balance is expected to maintain its improving trend,” the Central Bank also said in the statement released after the MPC meeting.

According to the latest data, Turkey’s current account deficit fell to $718 million in February, down from a $4.5 billion deficit a year ago, while the 12-month rolling deficit reached $17 billion.
Last year, the current account balance posted a deficit of $27.6 billion, improving from a nearly $47.5 billion deficit in 2017.
The figure was the lowest since 2009, while Turkey’s highest annual current account deficit over the last decade was in 2011 with $74.4 billion.

“Developments in domestic demand conditions have led to some improvement in inflation indicators. Yet higher food and import prices and the elevated course of inflation expectations point to continued risks to price stability,” the Central Bank said.
As of March, the country’s annual inflation stood at 19.71 percent, while the 12-month average hike in consumer prices was 18.7 percent.

Over the past decade, annual inflation saw its lowest level at 3.99 percent in March 2011, while it peaked at 25.24 percent last October.
“Accordingly, the Committee has decided to maintain the tight monetary policy stance until inflation outlook displays a significant improvement,” the bank said.

As noted in the new economy program announced in September 2018, Turkey’s inflation rate target is 15.9 percent this year, 9.8 percent next year and 6 percent in 2021.
“The Central Bank will continue to use all available instruments in pursuit of the price stability objective,” it said.
“Factors affecting inflation will be closely monitored and a monetary stance will be determined to keep inflation in line with the targeted path.”
In 2018, the bank held nine MPC meetings, as interest rates climbed from 8 percent to 24 percent over the course of the year.