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Turkey Monetary Policy June 2024

Turkey: Central Bank holds policy rate in June

At its meeting on 27 June, the Central Bank of the Republic of Turkey (CBRT) decided to keep the 1-week repo rate at 50.00%. The decision was aligned with market expectations and marked the third consecutive hold.

The Central Bank’s decision was primarily influenced by domestic factors. The decline in the underlying trend of monthly inflation paused in May, while inflationary pressures proved sticky due to high services price growth, inflation expectations, geopolitical risks and food prices. Meanwhile, the Bank noted that domestic demand continued to slow but remained at inflationary levels.

The Central Bank indicated that the current tight monetary stance will be maintained until there is a significant and sustained decline in the underlying trend of monthly inflation and inflation expectations align with the projected forecast range. It also mentioned that monetary policy could be tightened further if a significant and persistent deterioration in the inflation outlook is anticipated. Our Consensus is for the Bank to continue to hold in Q3 and cut rates slightly in Q4.

The next meeting is scheduled for 23 July.

Muhammet Mercan, chief economist at ING, commented:

“Overall, the [CBRT] has remained cautious with a continuing focus on its inflation outlook. There are also signals of fiscal consolidation lately, with increasing efforts to cut spending and for revenue raising actions without exerting pressure on prices. While adjustments on the fiscal side should be supportive for the disinflation process, monetary policy will remain key in the near term.”

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