MNI CBRT WATCH: Policy To Hold As Monthly Inflation Ticks Up

MNI (LONDON) - The Central Bank of the Republic of Turkey is expected to keep its one-week repo rate on hold at 50% when it meets on Thursday, with September’s +2.97% monthly inflation print highlighting the ongoing search for a “significant and sustained” decline in underlying price pressures. (MNI EM CBRTWATCH: Rates On Hold, Sees Expectations Upside Risk)

The CBRT dropped an explicit reference to being ready to tighten the monetary policy stance “in case a significant and persistent deterioration in inflation is foreseen,” from its September statement, prompting speculation that easing could begin as early as November this year. 

However, despite headline inflation falling from 51.97% to 49.38% in annual terms in the intervening period, higher-than-expected monthly data prompted Governor Fatih Karahan to comment that price dynamics need to weaken “permanently and significantly.”

Household inflation expectations have declined but are still markedly out of step with those of the CBRT itself. And with core inflation at 49.10%, there is little reason yet for the Bank to depart from its emphasis on the need to preserve tight monetary policy, even as the direction of travel remains clear. (See MNI BRIEF: Turkish Inflation Expectations Ease As CBRT Holds)