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Turkey Monetary Policy April 2024

Turkey: Central Bank leaves rates unchanged in April

At its meeting on 25 April, the Central Bank of the Republic of Turkey (CBRT) decided to hold the 1-week repo rate at 50.00%. The move followed a surprise hike in March and was in line with market expectations.

Commenting on the decision, the Bank highlighted that monthly inflation came in above expectations again in March, despite easing. Moreover, the CBRT stated that inflationary pressures remained elevated, stemming from the resilience of domestic demand, sticky services inflation and high inflation expectations. That said, taking into account the lagged effects of prior monetary tightening, the Bank decided to stand pat.

The Bank retained its hawkish tone, reiterating that “the tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed”. It also mentioned the possibility of tightening the monetary policy stance further if a significant and persistent deterioration in inflation is foreseen. Nevertheless, most of our panelists expect the CBRT to cut rates slightly by year-end.

The next meeting is scheduled for 23 May.

Analysts at the EIU said:

“The central bank will seek to keep interest rates high enough to discourage domestic demand and support real lira appreciation, which would significantly temper domestic prices. We expect that the CBT will not start reducing its policy rate until September.”

Clemens Grafe and Basak Edizgil, analysts at Goldman Sachs, commented:

“Going forward, we expect the TCMB to remain on hold as we see the risks to inflation in the near term skewed to the downside relative to expectations absent a significant external shock (such as a large and persistent rise in oil prices).”

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