Turkey's Central Bank keeps 50% rate, awaits inflation drop for cuts

By Al Mayadeen English
Source: Agencies
20 Aug 2024 20:40

Central Bank Deputy Governor Osman Akcay previously indicated that a consistent decline in inflation is necessary before a rate reduction can be considered.

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People warm themselves with a fire while fishing over the Galata bridge in Istanbul, Turkey, Wednesday, Feb. 21, 2024 (AP)

The Central Bank of Turkey's Monetary Policy Committee announced on Tuesday that it has decided to keep the key interest rate at 50% per annum, marking the fifth consecutive time the rate has remained unchanged, according to a statement from the regulator.

"The Monetary Policy Committee (the Committee) has decided to keep the policy rate (the one-week repo auction rate) constant at 50 percent," the statement read.

Central Bank Deputy Governor Osman Akcay previously indicated that a consistent decline in inflation is necessary before a rate reduction can be considered.

According to a report by the Turkish newspaper Dunya, major US investment banks such as Bank of America, Citi, and Morgan Stanley expect Turkey's key interest rate to remain at 50% at least until November, with the potential to hold at this level through the end of the year.

🇹🇷 CBRT MPC Meeting, 20 Aug'24 - The Central Bank of the Republic of Turkey decided to keep the policy rate (1-w repo auction rate) constant at 50%.#Türkiye #CBRT #mpc #policy #rate pic.twitter.com/CFKdfv3hxI
— Verimetrik (English) (@verimetrik_eng) August 20, 2024

Since the start of 2023, the Turkish lira experienced monthly depreciation, except for a respite in August. June 2023 also witnessed a substantial decline of nearly 25%, as the lira fell from 20.8 liras to 26 liras per dollar. The following month saw the exchange rate surpassing 27 liras.

In December 2023, Turkey faced a considerable inflationary surge as it reached approximately 65%, sparking worries over economic stability. Meanwhile, the inflation research group ENAG suggested a figure exceeding 127%.

Annual inflation rose to 69.8% in April from 68.5% in March, as reported by the Turkish Statistical Institute. ENAG estimated inflation even higher, at 124.35%.

In February, the head of the Turkish Central Bank (CBRT) Fatih Karahan declared that his primary goal is to ensure the effective control of inflation.

He also pledged to keep borrowing costs elevated until inflation reaches levels aligned with the bank's specified target.

Finance Minister Mehmet Simsek projected a decline in consumer price growth to 34% by the end of the current year.

He also expressed the government's goal to achieve price stability and reduce inflation to single digits by 2026.