Turkiye holds interest rates steady at 46% as disinflation progresses

The underlying trend of inflation showed a decline in May, and leading indicators suggest this trend is continuing into June. Data from the second quarter also points to a deceleration in domestic demand, contributing to the ongoing disinflation process, the MPC said in a statement.

However, the Committee highlighted several risks, including inflation expectations and pricing behaviours, as well as potential negative effects from global geopolitical developments and rising protectionism in trade. These factors are being closely monitored for their potential impact on inflation dynamics.

The CBRT reaffirmed its commitment to a tight monetary stance, stating that this approach is helping reduce inflation by dampening domestic demand, supporting the real appreciation of the Turkish lira, and improving inflation expectations. The central bank stressed that increased coordination with fiscal policy would further reinforce this progress.

The MPC reiterated that the policy rate would be set to maintain the required level of monetary tightness, taking into account both realised and expected inflation, as well as the underlying trend. Future rate decisions will be made on a meeting-by-meeting basis, with a focus on inflation outlook.

In response to any unexpected developments in credit and deposit markets, the CBRT signalled its readiness to deploy additional macroprudential measures to support monetary transmission. Liquidity conditions will continue to be monitored closely, and relevant tools will be used as necessary.

Looking ahead, the CBRT said it would maintain its tight policy stance until a sustained decline in inflation is achieved and the medium-term target of 5 per cent inflation is met. All policy decisions, it stated, will be made within a predictable, data-driven, and transparent framework.

ALCHEMPro News Desk (KD)