Turkish Central Bank holds key rate at 50% amid lira's record weakness

By Al Mayadeen English
Source: Agencies
27 Jun 2024 18:39

The decision is said to be in line with expectations among economists and market participants.

Listen

Workers upload goods in a truck in a street market at Eminonu commercial area, in Istanbul, Turkey, Thursday, May 23, 2024. Turkey's Central Bank held its interest rate unchanged at 50% for a second consecutive month. (AP Photo/Francisco Seco)

The Turkish Central Bank opted to maintain its key interest rate at 50% for the third consecutive time, citing concerns over the weakening national currency.

Earlier in the week, the lira hit a new all-time low of 33.06 against the US dollar, with Thursday's rate slightly improving to 32.86 liras per dollar.

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

The decision to maintain the key interest rate at 50% is said to be in line with expectations among economists and market participants.

The bank stated it would continue adjusting its policies in response to the impacts of monetary tightening, aiming to achieve the 5% inflation target.

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.