Turkish c. bank holds rates at 50%

The Turkish central bank opted to maintain its benchmark interest rate at 50 per cent for the second consecutive month on Thursday, aligning with predictions, Bloomberg reported.

The Monetary Policy Committee, led by Governor Fatih Karahan, reiterated its commitment to tight policy until a substantial and sustained decrease in monthly inflation is observed.

Anticipating the lingering impact of previous monetary tightening, the committee emphasised its vigilance towards inflation risks while announcing intentions to address credit growth and deposits to uphold macro-financial stability and support monetary transmission mechanisms.

This decision is crucial for sustaining the influx of foreign investment into local assets as investors express confidence in Turkey’s transition towards conventional economic policies aimed at curbing inflation, projected to reach around 75 per cent.

Despite Turkey’s nominal rates being the highest among G20 nations, they remain negative when adjusted for current prices. Officials highlight the disparity between borrowing costs and the central bank’s inflation projections, suggesting that policy is tighter than it appears.

With the outlook leaning towards a prolonged hold on policy rates, attention is shifting towards planned fiscal adjustments and alternative tightening measures.

However, global banks such as Morgan Stanley and HSBC Holdings plc suggest that rate hikes may still be on the horizon. Turkey anticipates inflation to decelerate next month, targeting an end-of-year rate of 38 per cent.