Turkey’s central bank maintained its benchmark interest rate at 50% for the fifth consecutive month on Tuesday, meeting market expectations. In a statement Tuesday, the central bank’s monetary policy committee noted that while monthly inflation rose slightly in July, it remained lower than the second-quarter average.
Indicators from the third quarter suggest that domestic demand is continuing to slow, which is helping to reduce inflationary pressure. While inflation in the goods sector is easing, the committee cautioned that improvements in services inflation will take longer to materialize.
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The bank highlighted ongoing risks from persistent services inflation, inflation expectations, and geopolitical factors. It stressed the need to align pricing behavior and inflation expectations with forecasts in order to support the disinflation process.
“The commitment to a tight monetary stance will help reduce the underlying trend of monthly inflation through moderated domestic demand, real appreciation of the Turkish lira, and improved inflation expectations,” the bank said in its statement.
While the effects of previous monetary tightening measures are still unfolding, the committee decided to keep the interest rate steady. The bank reiterated that this policy stance will remain until there is a significant and sustained decline in inflation.
In March, the central bank increased its policy rate from 45% to 50% to address rising prices. Consumer prices rose 61.8% in July compared to the previous year, a drop from June’s annual inflation rate of 71.6%, according to the Turkish Statistical Institute.