Central Bank of Turkey Keeps Interest Rate Steady at 50%

In previous meetings, the Central Bank had raised interest rates by a total of 4,150 basis points over nine sessions, including hikes of 650 basis points in June, 250 in July, 750 in August, and 500 in September, October, and November, among others. However, no rate changes were made in February, April, May, June, July, August, or September.

The Central Bank's statement highlighted that the underlying trend of inflation slightly increased in September. Indicators for the third quarter suggest that domestic demand continues to slow, approaching levels that support a decline in inflation. While core goods inflation remains low, improvements in service inflation are expected to occur in the final quarter of the year. However, uncertainty regarding the pace of inflation improvement has grown due to recent data. The MPC emphasized that inflation expectations and pricing behavior remain risks for the disinflation process.

The statement reaffirmed the Central Bank's commitment to a cautious monetary stance, which is expected to reduce inflation's underlying trend through domestic demand balancing, real appreciation of the Turkish lira, and improved inflation expectations. The tight monetary policy will continue until a significant and sustained drop in inflation is achieved, with monetary policy tools ready to be employed effectively if a marked and permanent deterioration in inflation is anticipated.