On Thursday, the Central Bank of the Republic of Türkiye (CBRT) kept the one-week repo rate, also known as the policy rate, compliant with the market forecast in its Monetary Policy Committee’s (MPC) meeting.
The bank kept its policy rate stable at 8.5% after holding it steady in March. It last cut it by 50 basis points in February to support economic activity after massive earthquakes hit the country’s south.
Meanwhile, the lender said that rising global inflation’s impact on both inflation expectations and international financial markets is being closely monitored.
Financial markets are indicating that there may soon be an end to cycles of interest rate hikes by central banks, the statement said.
It said that the Committee believes the current stance is adequate to facilitate the economic recovery following the recent massive earthquake in Türkiye’s south while ensuring price and financial stability.
A comprehensive evaluation of the earthquake’s impact on production, consumption, employment, and expectations has been conducted, it said. While the earthquake is expected to have a short-term effect on economic activity, it is not likely to permanently impact the Turkish economy in the medium term, the bank said, noting that leading indicators suggest economic activity in the affected region is recovering faster than anticipated.
"It’s worth noting that sustainable components comprise a significant portion of the growth composition. Tourism has played a strong role in boosting the current account balance, surpassing expectations throughout the year. However, there are still risks to the current account balance due to domestic consumption demand, high energy prices, and weak economic activity in major export markets," it said.
Most economists participating in AA Finance’s survey predicted that the policy rate would be kept constant at 8.5%.
Türkiye’s lira edged down on Thursday before the rate decision.
The lira traded at 19.4320 against the dollar by 9 a.m. GMT, weakening from Wednesday’s close of 19.4200.
The lira has plummeted to record lows this year as the central bank slashed interest rates.