Agencies
The Turkish central bank said on Friday that it will maintain its tight monetary stance until inflation shows a sustained decline, following its surprise decision last Thursday to raise its key policy rate.
The bank hiked its one-week repo rate to 46% from 42.5%, reversing its policy easing cycle, citing in part a slight rise in inflation expectations after a sell-off in the Turkish lira and other assets last month following the detention of Istanbul Mayor Ekrem Imamoğlu.
Imamoğlu was arrested in late March on corruption charges.“Inflation expectations and pricing behavior continue to pose risks to the disinflation process,” the Central Bank of the Republic of Turkey (CBRT) said following the decision. It also lifted the overnight lending rate to 49%.
The bank started easing in December, when the rate was 50%, marking the apparent end of an aggressive tightening effort since mid-2023 to bring down soaring prices.
In the minutes of last week’s rate-setting meeting, the bank on Friday said it will maintain its tight monetary stance until inflation shows a sustained decline. Annual inflation slowed to 38.1% in March, extending its fall from a peak of around 75% last May. The central bank’s year-end inflation midpoint estimate currently stands at 24%, in a forecast range of 19% to 29%.
The minutes cited slowing domestic demand, a stronger lira currency, and improved expectations as signs the disinflation process is taking hold.
The bank also said it resumed one-week repo auctions and took additional steps to support monetary transmission amid recent market volatility.
Earlier on Friday, a survey by the CBRT showed inflation expectations edged up in April for businesses and market participants, and remained steady at 59.3% in 12 months for households.
