Turkey’s Monetary Policy Committee, led by Central Bank Governor Fatih Karahan, decided to keep interest rates at 50% for the fifth consecutive month, justifying its decision by focusing on price and inflation expectations.
Turkey aims to reduce annual inflation, currently at 62%, to 38% by the end of December 2024, Reuters reported. But markets expect inflation to be closer to 42%, the upper end of the central bank’s forecast.
The MPC confirmed that monetary policy will remain tight until there is a “substantial and sustained decline in the underlying trend in monthly inflation.” Despite the decline in domestic demand and its diminishing impact on inflation, inflation in services remains high.
For his part, economic analyst Evren Kirikoglu explained – in an interview with Bloomberg – that the central bank will remain cautious in retreating from tight monetary policies until expectations improve significantly.
While he indicated that discussion of a rate cut could be on the table in December, risks could delay that, according to Kirikoglu.
With the central bank’s tight monetary policy since June last year, the change is part of the Turkish government’s attempts to lure back foreign investment after it left the country due to rising inflation.
