MNI CBRT WATCH: CBRT To Hold Steady, Look For Further Progress
MNI (LONDON) - The Central Bank of the Republic of Turkey is expected to hold the 1W repo at 50% for a sixth meeting in a row this week, leaving guidance largely unchanged as it looks for inflation to converge at 38% by the end of the year. (See MNI EM INTERVIEW: CBRT To Cut By Q1, Miss Price Target - Demiralp)
July’s meeting of the Monetary Policy Committee saw the Bank again confirm a hawkish bias. It reiterated that a tight monetary policy stance will be maintained “until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the projected forecast range, adding that it will take further tightening measures if needed.
After peaking at 75% in May, annual CPI inflation fell almost 10 percentage points on the previous month to 51.97% in August, while month-on-month inflation moderated from July's 3.23% to 2.47%.
However, while firms’ and households’ inflation expectations have declined, they remain above the central bank's target. Last month’s Inflation Report noted that the services sector remains a key driver of economic activity and inflationary pressure, increasing the likelihood that policymakers will wait until Q4 to make the first cut of the cycle. (See MNI EM INTERVIEW: CBRT May Cut To Boost Growth-Ex-Gov Official)