MNI CBRT WATCH: 'Cautious' Turkey CenBank To Hold Rates At 50%

MNI (LONDON) - The Central Bank of Turkey is expected to keep its policy rate on hold at 50% on Tuesday, maintaining its cautious stance and “whatever it takes” approach to lowering inflation amid early signs of easing price pressures.

Annual inflation fell to 71.60% last month from 75.4% in May, according to CBRT and Turkish Statistical Institute figures, a downside surprise.

However, Governor Fatih Karahan last week refused to entertain talk of cuts in his first interview as governor. It would be “premature”, he said, to conclude from one positive set of data that the decline in inflation is big enough and can be sustained. (See MNI EM INTERVIEW: CBRT To Cut Rates From Q4- Ex-Treasury Official)

Rather, despite indications that households and firms' inflation expectations are moderating compared with recent highs, the CBRT needs to see “clearer improvements” before it can “take some comfort that inflation expectations will support the disinflation process,” Karahan said.

The governor is unlikely to be drawn on the potential timing of future rate cuts next week, instead reiterating that the monetary stance policy will be tightened in the event that a “significant and persistent deterioration in inflation is foreseen.”

He may also repeat that while the CBRT’s revised year-end inflation goal of 38% is realistic, “it’s important to note that it’s not the final goal,” with sticky services inflation still a source of concern and policymakers focused on 2025’s 14% inflation target.