- The Central Bank of Turkey has decided to maintain its key interest rate at 50%, marking the fifth consecutive meeting where the rate remains unchanged, as expected by market analysts.
- Despite a decrease in inflation from 71.6% in June to 61.8% in July, the bank emphasized the need for a restrictive monetary policy until a “significant and permanent decline” in the underlying inflation trend is observed.
- Geopolitical instability and high interest rates are slowing domestic demand, which in turn affects the prices of goods, while inflation in the services sector is expected to decline at a slower pace.
Ankara, August 20 (FFN) – The Central Bank of Turkey has kept its key interest rate steady at 50%, continuing its restrictive monetary policy approach for the fifth consecutive meeting. This decision comes despite a noticeable decrease in inflation, which dropped to 61.8% in July from 71.6% in June. The bank indicated that it will closely monitor inflationary risks and maintain its stance until there is a “significant and permanent decline” in inflation trends.
The Monetary Policy Committee highlighted that while inflation has shown some signs of easing, the current economic conditions do not yet support a reduction in interest rates. The high reference rate has led to increased costs for loans, including mortgages and consumer credit, contributing to a slowdown in domestic demand. This has had a cooling effect on goods prices, but the bank noted that inflation in the services sector is likely to decline more slowly.
The Central Bank last raised its key interest rate by 500 basis points in March to counter the rapid rise in prices. Since then, the rate has been kept stable. Analysts generally expect the bank to begin cutting rates later this year if the economic outlook improves.
Earlier this month, the Central Bank reiterated its year-end inflation forecast of 38% for 2024, with further reductions expected to 14% in 2025 and 9% by 2026. However, economists predict that inflation could reach around 42% by the end of this year.
Overview of Turkey’s Economic Indicators
| Indicator | Value (July 2024) | Value (June 2024) | Note |
|---|---|---|---|
| Key Interest Rate | 50% | 50% | Stable since March 2024 |
| Year-on-Year Inflation | 61.8% | 71.6% | Decreasing but remains high |
| Projected Inflation (End of 2024) | 38% | – | Central Bank forecast |
| Projected Inflation (End of 2025) | 14% | – | Central Bank forecast |
| Projected Inflation (End of 2026) | 9% | – | Central Bank forecast |
| March 2024 Rate Increase | +500 basis points | – | Last rate hike to control rising prices |
