Turkey Central Bank Retains Key Rate

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Turkey’s central bank left its key interest rate unchanged on Thursday, after cutting it by 50 basis points last month.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey, led by Governor Murat Uysal, decided to hold the policy rate, which is the one-week repo auction rate, at 8.25 percent. The bank was expected to cut the rate by 25 basis points.

The bank had reduced the rate four times so far this year.

In order to contain negative effects of the pandemic on the Turkish economy, the bank observed that it is of crucial importance to ensure the healthy functioning of financial markets, the credit channel and firms’ cash flows.

According to MPC, recent monetary and fiscal measures contribute to financial stability and economic recovery by supporting the potential output of the economy.

Global commodity prices continued to restrain inflation, while food price inflation accelerated due to seasonal and pandemic-related effects. As the normalization process continues, supply-side factors will phase out and demand-driven disinflationary effects will become more prevalent in the second half of the year, policymakers noted.

Policymakers observed that keeping the disinflation process in track with the targeted path requires the continuation of a cautious monetary stance.
Further, the MPC vowed to take all available instruments in pursuit of the price stability and financial stability objectives.

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