Turkey’s Central Bank on Wednesday kept its one-week repo rate — also known as the policy rate — steady at 19%, in line with market expectations.
After the committee’s seventh Monetary Policy Committee meeting of the year, the bank said in a statement: “The strong recovery in the global demand, increasing trend of commodity prices, supply constraints in some sectors and the rise in transportation costs have led to producer and consumer price increases internationally.”
“The effects of the rising global inflation and inflation expectations on international financial markets remain significant,” it added.
The bank had also kept its benchmark interest rate constant at 19% in its previous Monetary Policy Committee meeting last month.
Turkey’s annual inflation rate stands at 17.53% in June, according to the latest data from the Turkish Statistical Institute.
Domestic demand has decreased slightly due to the tightening in financial conditions and restrictions meant to curb coronavirus infections, the bank noted, though adding that external demand remains strong.
“The acceleration of domestic vaccination rollout facilitates the recovery in services and tourism sectors, which have been adversely affected by the pandemic, and leads to a more balanced composition in economic activity,” it added.
The bank stressed that the tight monetary policy in place has positively affected the current account balance, which is expected to go into surplus for the rest of the year.
“Taking into account the high levels of inflation and inflation expectations, the current tight monetary policy stance will be maintained decisively until the significant fall in the April Inflation Report’s forecast path is achieved.”
It underlined that the bank will continue to use its instruments for price stability.
Cristian Maggio, head of emerging market strategy at Canadian-based TD Securities, stressed that inflation dynamics in Turkey still appear adverse, saying that for the time being, “I see it very hard to deliver easing in August as well.”
If the bank is leaning towards a cut in August, it will need to start signaling it this week, he noted, adding: “Q4 is probably the earliest that the CBRT (Central Bank of the Republic of Turkey) may cut.”
“The headline inflation climbed markedly to 17.5% year-on-year in June, well exceeding expectations,” recalled Phoenix Kalen, emerging markets strategy director at the Paris-based Societe Generale.
“We expect unchanged rates by November and have penciled in a 100 basis points rate cut in the fourth quarter,” he said./ibna
Source: Anadolu Agency