Turkish flag on top of Deniz Bank building. Turkey is expected to head to the polls on Sunday.
Ismail Ferdous | Bloomberg | Getty Images
Turkey's central bank on Thursday kept its key interest rate unchanged at 45%, even as inflation soars after eight consecutive months of rate hikes.
The move was widely expected after the central bank said in January that it expected its last 250 basis point rate hike of the year, despite current inflation at around 65%.
Consumer prices in the country of 85 million people rose 6.7% last month from December, the biggest monthly rise since August, data from Turkey's central bank showed. In January, sales rose 64.8% compared to the same month last year.
Turkey's key interest rates have increased by a cumulative 3,650 basis points since May 2023. The latest decision to keep interest rates unchanged rather than lower them shows consistency with the strategy of newly appointed Turkish central bank governor Fatih Karahan and his predecessor Hafizeh Erkan. Callaghan took office in early February.
Analysts viewed the central bank's accompanying press statement as hawkish and suggesting that interest rates would not be eased in the near future.
“The committee assesses that the current level of the policy rate will be maintained until the underlying trend in monthly inflation has reduced significantly and sustainably and until inflation expectations have converged to the expected forecast range,” the central bank said in a statement. “I am doing so,” he said. “Monetary policy stance will tighten if we expect a significant and sustained deterioration in the inflation outlook.”
Economists expect current interest rates to remain in place for much of 2024 and expect inflation to be roughly halved by the end of the year, meaning monetary easing could still be an option. There is.
“We believe the interest rate suspension is likely to be extended in the coming months, with year-end inflation expected to be between 30% and 35% (broadly in line with the CBRT's 36% forecast), with central bank policy There's still a chance we could cut interest rates.'' An easing cycle begins before the end of the year, which many analysts expect,'' said Liam Peach, senior emerging markets economist at London-based Capital Economics. he said in a memo Thursday.
“However, our fundamental view remains that rates will remain unchanged for the rest of the year and that no rate cuts will occur until early next year.”
