Ankara: The Turkish Central Bank on Thursday kept its policy rate unchanged at 37% for the third consecutive Monetary Policy Committee meeting, while reiterating that it remains attentive to upside risks to inflation.
According to Anadolu Agency, the decision matched the results of an Anadolu survey, while the bank last cut its policy rate in January, lowering the one-week repo auction rate from 38% to 37%. The bank also kept the Central Bank overnight lending rate and overnight borrowing rate unchanged at 40% and 35.5%, respectively.
The underlying trend of inflation, which increased in April partly due to higher energy prices after rising in the first months of the year, decreased slightly in May, it said, and added: 'Amid geopolitical developments and the resulting uncertainties, energy prices remain volatile and elevated.'
The bank noted that first-quarter data pointed to a slowdown in economic activity, while leading indicators suggested a continued weak course in domestic demand. 'The impact of geopolitical developments on the inflation outlook through the cost channel, economic activity and expectations is closely monitored,' it added.
The committee said the tight monetary policy stance will be maintained until price stability is achieved, adding that this stance will strengthen the disinflation process through demand, exchange rate and expectation channels. It said the policy rate will be determined by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with interim targets.
The committee also reiterated that monetary policy decisions will be made prudently on a meeting-by-meeting basis with a focus on the inflation outlook. 'In case of a significant and persistent deterioration in the inflation outlook, monetary policy stance will be tightened,' it said.
The bank added that liquidity conditions will continue to be closely monitored and liquidity management tools will be used effectively. The committee said it would make policy decisions to create the monetary and financial conditions necessary to reach the 5% inflation target in the medium term.
In May, Trkiye's annual inflation rose to 32.61%, from 32.37% in April. The monthly consumer price index also climbed 1.71% in May.