The Central Bank has decided to keep the policy rate unchanged at 50% after the latest meeting of its Monetary Policy Committee.
The bank kept the rate constant for the last two months, after a drastic increase in a year from 8.5% to 50%.
In its statement, the committee reaffirmed its commitment to a tight monetary policy stance until there is a "significant and lasting decline in the underlying trend of monthly inflation."
The committee highlighted that in July, the underlying trend of monthly inflation "rose slightly compared to the previous month," but remained below the second-quarter average. It noted that indicators for the third quarter suggest domestic demand continues to slow, reducing its inflationary impact.
Risks
While the committee acknowledged that "goods inflation is easing," it warned that "improvement in service inflation is likely to be delayed." The persistent high levels of service inflation, along with sticky inflation expectations and geopolitical developments, continue to pose risks, it added.
"The determined stance in monetary policy, alongside a balancing of domestic demand, real appreciation of the Turkish lira, and improved inflation expectations, will help reduce the underlying trend of monthly inflation and strengthen the disinflation process," the committee stated.
Despite deciding to hold the policy rate steady, the committee reiterated its cautious approach against upward risks to inflation, stating that "the tight monetary policy will be sustained until a clear and permanent decline in the underlying trend of monthly inflation is achieved." The Committee also warned that if there are signs of a significant and lasting deterioration in inflation, "the monetary policy stance will be tightened further." (VK)