Turkey’s central bank has maintained its main interest rate fixed at 46% on Thursday, as expected, and also maintained the upper interest rate zone to 49%, despite forecasts that it would be reduced, Reuters notes.
The central bank’s move to interest rates essentially extends the cessation of a policy in view of the expected repetition of interest rates that could come this summer.
The Bank of Turkey said inflation would continue to decline and growth would slow down.
“The tight monetary policy will be maintained until prices stability is achieved through a continuous reduction in inflation,” the bank’s policy committee noted, repeating its previous position.
“The underlying tendency to inflation declined in May. The precursors indicate that this reduction continues in June, “he added. “The figures for the second quarter indicate a slowdown in domestic demand,” he said.
Had preceded an increase in interest rates
In April, the Central Bank raised its policy interest rate to 46% from 42.5%, reversing a relaxation cycle that had begun in December after market volatility due to the arrest of the Mayor of Constantinople in March.
The one -day funding rate increased by 700 basis points after Imoglou’s arrest, but last week it fell close to policy rate, which analysts described as an indication that the bank was preparing the ground for possible interest rates.
“The bank has changed its tone to prepare markets for the start of a rate reduction cycle,” said Andrew Birch, Economics Associate Director at S&P Global Market Intelligence.
“If the Central Bank intends to achieve its goal of inflation 24% at the end of the year, it should be careful in reducing interest rates due to continuing uncertainty in the market,” he said.
In a Reuters poll, economists expected that the Central Bank would maintain a one -week interest rate, but would reduce the one -day borrowing rate – a maximum of 150 basis points to 47.5%. Instead, it was kept at 49%.
An interest rate reduction is considered possible at the next meeting on July 24th. Reuters polls show that the relaxation cycle, as soon as it begins again, will continue at least until mid -2026.
Source: Skai
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