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Turkey Central Bank Maintains Key Rates As Expected

Turkey central bank maintained its key interest rates for the third straight month, as the weak currency and high commodity prices weigh on the inflation outlook.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey governed by Sahap Kavcioglu, decided to hold the key one-week repo rate at 19.00 percent.

The bank had lifted the interest rates by 200 basis points at the March meeting under the leadership of former governor Naci Agbal.

After taking into account the high levels of inflation and inflation expectations, the MPC said the current tight monetary policy stance will be maintained decisively until the significant fall in the April Inflation Report's forecast path is achieved.

The committee reiterated that it will continue to use decisively all available instruments in pursuit of the primary objective of price stability.

The policy rate will continue to be determined at a level above inflation to maintain a strong disinflationary effect until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is reached, the bank said.

The statement from the Turkish central bank to leave its policy rate suggested that policymakers are standing up to political pressure to lower interest rates, William Jackson, an economist at Capital Economics, said. But an easing cycle is likely to begin in the third quarter.

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