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Turkey Central Bank Leaves Key Rate Unchanged

Turkey's central bank on Thursday left its key interest rate unchanged, saying risks to price stability persisted despite some improvement in the inflation outlook.

The Monetary Policy Committee, led by Governor Murat Cetinkaya, decided to keep the policy rate unchanged at 24 percent, the TCMB said in a statement. The decision was in line with economists' expectations.

"While developments in import prices and domestic demand conditions have led to some improvement in the inflation outlook, risks on price stability continue to prevail," the bank said.

"Accordingly, the Committee has decided to maintain the tight monetary policy stance until inflation outlook displays a significant improvement."

Headline inflation slowed to 21.62 percent in November from 25.24 percent in October. GDP growth slowed sharply to 1.6 percent year-on-year in the third quarter.

Citing recent data, the central bank said the rebalancing trend in the economy has become more noticeable.

External demand maintains its strength, but slowdown in economic activity continues, partly due to tighter financial conditions, the bank added.

Further, the bank said it will closely monitor inflation expectations, pricing behavior, lagged impact of recent monetary policy decisions, contribution of fiscal policy to rebalancing process, and other factors affecting inflation.

"...if needed, further monetary tightening will be delivered," the bank said.

Captial Economics said the policy statement suggests that the MPC is contemplating rate cuts.

"With inflation falling back and political pressure on the central bank to lower rates set to build ahead of March's local elections, we now think it's more likely than not that policy loosening will begin at the January meeting with a 50bp cut in the one-week repo rate," Capital Economics economist Jason Tuvey said.

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