Turkish Central Bank leaves policy rate unchanged, as expected

ISTANBUL

The Turkish Central Bank on Thursday decided to keep the benchmark policy rate constant, matching expectations.

The benchmark one-week repo rate currently stands at 46%.

The bank said the underlying trend of inflation declined in May, and the leading indicators suggest that this decline will continue in June.

"Data for the second quarter point to a slowdown in domestic demand," it said in a statement.

The bank stated that potential effects of the geopolitical developments and the rising protectionism in global trade on the disinflation process are "closely" monitored. Inflation expectations and pricing behavior continue to pose risks to the disinflation process.

"The decisiveness regarding the tight monetary stance is strengthening the disinflation process through moderation in domestic demand, real appreciation in the Turkish lira, and improvement in inflation expectations," it noted.

The bank stressed that the policy rate will be determined in a way to ensure the tightness required by the projected disinflation path, taking into account realized and expected inflation and the underlying trend.

Türkiye's annual inflation rate in May eased for the 12th consecutive month to 35.41%, its lowest reading since December 2021.

From May 2023 until last March, the bank raised the rate from 8.5% to 50% and then kept it constant until its meeting last December, when it lowered the rate 250 basis points to 47.5%.

The bank cut the benchmark rate at its last three meetings from 47.5% to 42.5%. In the April meeting, in a surprise move, the bank raised the rate by 350 basis points to 46%.