The Turkish Central Bank keeps interest rates unchanged

Key Points:

• Turkey’s central bank keeps key interest rate steady at 45 percent.
• Decision aligns with market expectations post-last month’s rate hike.
• Central bank prepared to tighten monetary policy if significant and sustained deterioration in inflation expectations emerges.
• Appointment of Fateh Kara Khan as governor followed the resignation of Hafiza Ghaya Arkan.
• Monetary tightening policy pursued since June, coinciding with President Erdogan’s reelection.
• Year-end inflation expectations maintained at 36 percent despite potential for exceeding target rate.

Turkey’s Central Bank Holds Interest Rate at 45%

Turkey’s central bank opted to keep its key interest rate steady at 45 percent on Thursday, aligning with expectations following last month’s rate hike. However, the bank emphasized its readiness to tighten monetary policy should the risk of a significant and sustained deterioration in inflation expectations arise.

The monetary policy meeting took place against the backdrop of Fateh Kara Khan’s appointment as governor of the Central Bank on February 3, succeeding Hafiza Ghaya Arkan, who resigned citing the need to shield her family from what she described as a media smear campaign.

Since June, the bank has raised its one-week repurchase rate by 3,650 points, a move coinciding with President Recep Tayyip Erdogan’s reelection in May and a notable shift towards a policy of monetary tightening.

All 11 economists surveyed by Reuters anticipated that interest rates would remain unchanged this month.

Kara Khan, in presenting the bank’s quarterly inflation report earlier this month, affirmed his commitment to a policy of monetary tightening until inflation reaches the target rate. Despite expectations of inflation exceeding this threshold, year-end inflation expectations were maintained at 36 percent.