Turkish Central Bank Leaves Policy Rate Unchanged at 46 Percent

Members of the bank’s Monetary Policy Committee (MPC) also maintained the overnight lending rate and the overnight borrowing rate at 49 percent and 44.5 percent, respectively.

The decisiveness regarding tight monetary stance is strengthening the disinflation process through moderation in domestic demand, real appreciation in Turkish lira, and improvement in inflation expectations, read the statement release after the MPC meeting on June 19.

Going forward, increased coordination of fiscal policy will also contribute significantly to this process. The tight monetary stance will be maintained until price stability is achieved via a sustained decline in inflation, it added.

The tight monetary stance will be maintained until price stability is achieved via a sustained decline in inflation, the bank reiterated.

The bank increased the policy rate from 42.5 percent to the current 46 percent in April. It also lifted its overnight lending rate from 46 percent to 49 percent and the overnight borrowing rate from 41 percent to 44.5 percent.

“Accordingly, the policy rate will be determined in a way to ensure the tightness required by the projected disinflation path taking into account realized and expected inflation, and the underlying trend,” said the statement on June 19.

The committee will adjust the policy rate prudently on a meeting-by-meeting basis with a focus on the inflation outlook, the statement added, saying that all monetary policy tools will be used effectively in case a significant and persistent deterioration in inflation is foreseen.

The underlying trend of inflation declined in May, said the bank, adding that leading indicators suggest that this decline continues in June.

According to the bank, data for the second quarter point to a slowdown in domestic demand. Yet, it stressed that inflation expectations and pricing behavior continue to pose risks to the disinflation process.

Turkey's annual inflation was at 35.41 percent in May, down from 37.86 percent in April, its lowest level since November 2021.

The monthly inflation also slowed from 3 percent to 1.5 percent.

In May, the Central Bank kept its inflation forecast for 2025 at 24 percent, while leaving its end-2026 forecast unchanged at 12 percent. It targets inflation to decrease to 8 percent in 2027 and stabilize at 5 percent in the medium term.

The bank said it is closely monitoring potential effects of the geopolitical developments and the rising protectionism in global trade on the disinflation process are closely monitored.

Source: HDN