The Central Bank of Turkey’ Monetary Policy Committee has decided to keep the policy rate, one week repo auction rate, constant at 17.75 percent. Data released recently showed that a more considerable rebalancing trend in the economic activity. External demand continues to keep its strength, while signs of slowdown in domestic demand become more visible.
Cost factors and volatility in food prices have mainly driven the recent surge in inflation. Meanwhile, price rises have indicated a generalized pattern throughout subsectors. In spite of the milder impact of demand conditions on inflation, increased levels of inflation and inflation expectations continue to pose risks on the pricing behaviour. Accordingly, the MPC assessed that it might be necessary to maintain a tight monetary stance for an extended period.
The Turkish central bank stated that it will continue to use all available instruments in pursuit of the price stability objective. Tight stance in monetary policy would be maintained decisively until inflation outlook displays a considerable rebound. Inflation expectations, pricing behaviour, lagged impact of recent monetary policy decisions, contribution of fiscal policy to rebalancing process, and other factors impacting inflation would be closely monitored and, if required, further monetary tightening would be delivered.
