Central Bank of Turkey Keeps Interest Rate Unchanged at 50%

The CBRT had previously increased the policy rate multiple times: 650 basis points in June, 250 in July, 750 in August, and 500 each in September, October, and November. In February, the rate was kept steady at 45%, but in March, it was raised by 500 basis points to 50%, where it remained through April and May.

Economists' Expectations

According to the CBRT's market participants survey, all economists predicted that the policy rate would remain at 50%. The median year-end policy rate expectation among economists was also 50%.

MPC Statement Highlights

The MPC statement noted:

• Monthly inflation saw a temporary setback in May, though domestic demand, while still inflationary, showed signs of slowing.
• High service inflation, inflation expectations, geopolitical risks, and food prices continue to exert inflationary pressures.
• The effects of monetary tightening on loans and domestic demand are being closely monitored. Although the policy rate was kept steady, the committee emphasized its cautious stance against upside risks to inflation.
• Monetary tightening will continue until a marked and permanent decrease in the underlying trend of inflation is achieved. Should there be a significant and permanent deterioration in inflation forecasts, the monetary policy stance will be tightened further.

Inflation Target

The statement reiterated the CBRT's commitment to achieving a 5% inflation target in the medium term, emphasizing that all necessary tools would be used decisively to ensure price stability.