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Financial News: Turkey Maintains Policy Rate At 45% Under New

Turkey Maintains Policy Rate At 45% Under New Governor

02/22/2024 - 09:02:00 (RTTNews)

(RTTNews) - The Turkish central bank left its benchmark rate unchanged at the first policy meeting under the governorship of Fatih Karahan after a slew of rate hikes, and signaled that the rate will be maintained at the current level or will be tightened further in case of persistent deterioration in the inflation outlook.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey, or CBRT, decided to hold the policy rate at 45.00 percent on Thursday.

"The determination in tight monetary stance will continue to contribute to Turkish lira's real appreciation process, which is a key element of disinflation," the bank said in the statement.

The MPC said the current level of the policy rate will be maintained until there is a significant and sustained decline in the underlying trend of inflation and until inflation expectations converge to the projected forecast range.

Monetary policy stance will be tightened in case a significant and persistent deterioration in inflation outlook is anticipated, the committee added.

An extended interest rate pause is likely over the coming months, said Capital Economics economist Liam Peach.

With inflation likely to end the year at 30-35 percent, there is still a possibility that the central bank starts an easing cycle before the end of the year as many analysts expect.

However, Peach said the rate will stay on hold throughout this year and that rate cuts would not arrive until early next year.

Karahan was appointed as the new governor early this month after the surprise resignation of Hafize Gaye Erkan, the first female governor of CBRT. On his appointment, Karahan said achieving the price stability will be the main priority and efforts will continue to ensure disinflation.

Erkan had raised the policy rate from 8.50 percent to the current 45.00 percent to rein in high inflation. Despite aggressive rate hikes, Turkey's inflation remained close to 65 percent in January.

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