The Turkish Central Bank on Thursday kept interest rates unchanged at 50%, but warned that recent data had increased uncertainty about inflation in a possible signal of a tendency towards monetary tightening before expectations of the start of an easing cycle in monetary policy in the coming months.
The bank’s policy committee said, “In September, the underlying path of inflation recorded a slight increase… The uncertainty surrounding the pace of improvement in inflation increased in light of the incoming data.”
The last time the bank raised key interest rates was in March, when it increased them by 500 basis points, concluding a strong monetary tightening cycle that began in June last year to combat sharply rising inflation.
But since last month, the central bank has appeared to be paving the way for a possible rate cut by abandoning the signal for further monetary tightening.
High inflation
But after monthly inflation increased faster than expected by about 3% last September, a Reuters poll showed that analysts expect the bank to wait until next December or January before starting a supposed monetary easing cycle.
Annual inflation fell to 49.4%, below key interest rates for the first time in that cycle, after reaching a peak of 75% last May.
It is noteworthy that the foreign exchange rate has been stable for several months in Türkiye, as the dollar rose slightly to 34.15 liras, while the euro rose to 37.21 liras.
