Central Bank extends rate pause for sixth month

Central Bank extends rate pause for sixth month

ANKARA
Central Bank extends rate pause for sixth month

In a widely expected move, Türkiye’s Central Bank has left its policy rate unchanged at 50 percent for the sixth month in a row.

In a statement released after the Monetary Policy Committee meeting on Sept. 19, the bank reiterated that it remains highly attentive to inflation risks.

“The 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,” it said.

Indicators for the third quarter confirm that domestic demand continues to slow down with a diminishing inflationary impact, according to the bank.

However, it warned that inflation expectations and pricing behavior continue to pose risks to the disinflation process.

“The decisiveness regarding tight monetary stance will bring down the underlying trend of monthly inflation through moderation in domestic demand, real appreciation in Turkish Lira, and improvement in inflation expectations,” the bank said.

Consequently, the disinflation process will gain strength, it stressed.

Since June last year, the country’s Central Bank has raised the one-week repo rate by 4,150 basis points to rein in rampant inflation.

The annual inflation rate slowed from 61.78 percent in July to 51.97 percent in August.

Monetary policy tools will be used effectively in case a significant and persistent deterioration in inflation is foreseen, the bank noted in the statement.

In case of unanticipated developments in credit and deposit markets, the monetary transmission mechanism will be supported via additional macroprudential measures, the bank stressed.

“Liquidity conditions are assessed with respect to prospective developments and closely monitored. Sterilization tools will continue to be implemented effectively,” it said.

“Taking into account the lagged effects of monetary tightening, the committee will make its policy decisions so as to create the monetary and financial conditions necessary to ensure a decline in the underlying trend of inflation and to reach the 5 percent inflation target in the medium term,” the bank added.

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