Turkey’s c. bank to review rates on June 27

Turkey’s Central Bank is set to convene this week to decide on its policy rate, currently at 50 per cent, when the Monetary Policy Committee (MPC) meets on June 27.

Most economists anticipate that the key rate will remain unchanged at 50 per cent, following a surprise 500-basis point increase in March from 45 per cent, marking a total rise of 4,150 basis points since June 2023.

The bank has not adjusted interest rates since March, when it cited the delayed effects of monetary tightening as the reason for maintaining the rate steady during the latest MPC meeting on May 23.

The bank emphasised its vigilance towards inflation risks and committed to a tight monetary policy until a sustained reduction in monthly inflation trends is observed and inflation expectations align with forecast ranges.

In May, Turkey’s annual inflation rate surged from 69.8 per cent in April to 75.45 per cent, with a monthly increase of 3.37 per cent. The central bank adjusted its end-of-year inflation forecast from 36 per cent to 38 per cent for 2024, while keeping forecasts for 2025 and 2026 steady at 14 per cent and 9 per cent, respectively.

Finance Minister Mehmet Şimşek expressed confidence that the government’s economic programme would reduce inflation, predicting levels in the low 40s or high 30s later this year, potentially falling to the mid-10s next year, and eventually reaching single digits.

President Recep Tayyip Erdogan also indicated an improved inflation outlook in the fourth quarter, stressing that interest rate adjustments are key to achieving more favourable inflation levels.

Attribution: Hurriyet Daily News.