Turkish Central Bank Holds Key Rate Unchanged For Second Month

turkey may31 19jan23 lt

Turkey's central bank left its key interest rate unchanged for the second straight month as inflation slowed notably from near 85.0 percent.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey, or TCMB, decided to hold the policy rate at 9.00 percent. The outcome of the meeting widely matched expectations.

The bank has lowered the policy rate by a cumulative 500 basis points since last August.

Official data released early this month showed that consumer price inflation remained elevated in December, but signaled a slight moderation to a nine-month low of 64.3 percent from 84.4 percent in November.

The central bank said it will continue to use all available instruments decisively until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is achieved.

The bank observed that underlying trend of inflation has improved with the help of policy measures taken so far, including the "Liraization Strategy".

Inflation is likely to drop further, to below 45 percent in March, as the sharp rise in prices following the 2021 currency crisis falls out of the annual comparison, Capital Economics economist Liam Peach said.

With inflation falling sharply amid slower economic growth and elections approaching, there is a risk that political pressure from President Erdogan forces the central bank to resume interest rate cuts before long, the economist noted.

Peach cautioned that the longer interest rates remain so low and the currency remains so stable, the greater the risk that a bigger adjustment will be needed in the future.

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