MNI CBRT WATCH: Key Turkish Interest Rates Left Unchanged

The Central Bank of the Republic of Turkey left interest rates unchanged on Thursday, and said that despite indications of a further decline in the underlying trend of inflation in June, inflation expectations and  pricing behaviour continue to pose risks to the disinflation process. (See MNI EM CBRT WATCH: Policy Rate Hold Seen; Cuts Resume From July)

The Monetary Policy Committee kept the one-week repo auction rate at 46%, and, in something of a hawkish surprise, opted not to adjust either the overnight lending rate or the overnight borrowing rate, which remain at 49% and 44.5%, respectively. (See MNI INTERVIEW: CBRT To Cut 600bps After June Hold -Turhan)

The CBRT’s tight monetary policy stance is strengthening the disinflation process through moderation in domestic demand, real appreciation of the Turkish lira, and improving inflation expectations, the MPC said in a statement that was largely unchanged from April. 

“Increased coordination of fiscal policy will also contribute significantly to this process. The tight monetary stance will be maintained until price stability is achieved via a sustained decline in inflation," it said. (See MNI BRIEF: Turkish Inflation Expectations Fall Again)