The Central Bank of the Republic of Turkey held its policy rate at 37% on
Wednesday, and reiterated that it is monitoring the effects of the conflict in
the Middle East. The committee "remains highly attentive to upside risks on
inflation," the CBRT said in a press release, adding that a "deterioration in
the inflation outlook," which could be driven by the war, could require a
tighter monetary policy stance. "The effects of these developments and domestic
energy prices on the inflation outlook through the cost channel and economic
activity are being closely monitored." While underlying inflation declined to
30.9% in March, the Bank noted that leading indicators suggest a slight increase
to the trend in April. The medium-term inflation target is 5%. The CBRT said
that indicators are pointing to a slowdown in economic activity, but that
"second-round effects of recent developments on the inflation outlook will be of
importance." (See MNI INTERVIEW: CBRT Should Signal Willingness To Cut - Ex-DG:
https://www.mnimarkets.com/articles/mni-interview-cbrt-should-signal-willingnes
s-to-cut-ex-dg-1773235384417) Since the decision, market pricing imply a central
expectation for inflation to end the year in the high twenties, less than a
third of the way to the year-end target of 16%. Since one-week repos were
suspended on March 1, liquidity has been supplied at the overnight lending rate
of 40%, resulting in slightly tighter financial conditions than the headline
policy rate would suggest. The Bank restated that the current monetary policy
stance will remain tight until price stability is achieved.
Apr-22 14:38
