MNI CBRT WATCH: Turkish Cenbank Set To Hold, Stress Vigilance

Turkey’s central bank is expected to hold its policy rate at 50% for a second time on Thursday, while stressing that it remains ready to raise rates again should inflation expectations deteriorate significantly and persistently.

The CBRT raised its target inflation rate for 2024 from 36% to 38% earlier this month, with inflation at 68.9% in April and set to peak close to 75% in the coming weeks, though former deputy governor Fatih Ozatal told MNI recently that prudential changes contributing to tighter financing conditions, an improving current account balance and a stable currency should help inflation end the year inside the tolerance band. (See MNI EM INTERVIEW: CBRT On Track To Hit Target- Ex-Deputy Governor)

Governor Fatih Karahan has also drawn support from powerful finance minister Mehmet Simsek, whose recently-announced package of fiscal spending cuts is intended to help curb inflation at the same time as signalling government confidence in the central bank’s programme.

But while foreign investors appear increasingly confident in the CBRT, gaining public trust may be more difficult, with household inflation perceptions stuck well above those of the Bank itself. Karahan will once again seek to reiterate that while there is light at the end of the tunnel, there is still a long way to go. (See MNI EM INTERVIEW: CBRT Inflation Target May Go To 45% - Demiralp)