Turkey's central bank held its benchmark interest rate steady on Sept. 10, matching market expectations as energy cost pressures continue to pose risks to the inflation outlook.
The Monetary Policy Committee kept its key one-week repo auction rate unchanged at 37%, maintaining the rate at the same level as July. The decision aligned with forecasts from all economists surveyed by Anadolu Agency and 19 financial institutions polled by BloombergHT.
The bank said that rising energy prices driven by geopolitical uncertainties have revived inflationary tendencies.
'In the event of a significant and persistent deterioration in the inflation outlook, the monetary policy stance will be tightened,' the committee said in its policy release. The bank emphasized its cautious stance against upside risks, despite recent data showing a clearer slowdown in domestic demand.
Official data showed annual inflation slowed to 31.51% in August, though rising energy costs and educational price adjustments limited the deceleration. Median expectations among economists project the policy rate to reach 35% by the end of the year.
The central bank's next rate-setting meeting is scheduled for Oct. 22.
ECONOMISTS WEIGH POLICY STANCE
Analysts said that while the bank is holding off on rate cuts for now, tight credit conditions remain a bottleneck for businesses.
'Even if the central bank cut rates by 100 or 300 basis points, real sector complaints will continue as long as monthly credit growth limits for banks remain in place,' said Atılım Murat, a professor at TOBB ETÜ University. He described the policy statement as hawkish.
Hande Şekerci, chief economist at İş Portföy, expects cautious rate cuts starting in October, barring global disruptions.
Binhan Elif Yılmaz of Istanbul University added that Turkey's disinflation strategy remains heavily reliant on a high-interest, real lira appreciation model, showing that the path to single-digit inflation is more challenging than anticipated.
