Central Bank likely to keep policy rate steady this week

ANKARA

Most economists expect Türkiye’s Central Bank to keep its policy rate steady at 50 percent when members of the Monetary Policy Committee meet later this week on Sept. 19.

In August, the monetary authority held the one-week repo auction rate unchanged at 50 percent for a fifth straight month. The bank last raised rates in March by 500 basis points.

Since June last year, the country’s Central Bank has raised its policy rate by a total of 4,150 basis points to rein in rampant inflation.

The annual inflation rate, which peaked at 75.45 percent in May this year, slowed from 61.78 percent in July to 51.97 percent in August, according to the latest official data available.

The Central Bank’s survey of market participants showed last week that inflation expectations for the end of 2024 declined from 43.3 percent in August to 43.1 percent in September.

Even though the bank has not given any indication as to when it could begin cutting the policy rate, economists responding to a poll by state-run Anadolu Agency said they expected a cut by the end of the year.

Meanwhile, the U.S. Federal Reserve is gearing up to announce its first interest rate cut for more than four years on Sept. 18, with policymakers expected to debate how big a move to make less than two months before the U.S. presidential election.

Senior officials at the U.S. central bank including Fed chair Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank's long-term target of 2 percent, and the labor market continues to cool.

The debate among policymakers on Sept. 17-18 will likely center on whether to move by 25 or 50 basis points.

However, a rate cut of any size would be the Fed's first since March 2020, when it slashed rates to near-zero in order to support the U.S. economy through the COVID-19 pandemic.