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Turkish central bank keeps key interest rate steady at 50 percent

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Turkey’s central bank on Thursday kept its key interest rate stable at 50 percent for the second month in a row even as the country is struggling with soaring inflation, Agence France-Presse reported.

The bank’s monetary policy committee said it remains highly attentive to inflation risks.

Ahead of the March 31 local elections, the central bank hiked its rate from 45 percent to 50 percent as inflation had become a constant headache for President Recep Tayyip Erdoğan’s government.

Turkey’s rate of annual inflation rose to 69.8 percent in April despite interest rate hikes aimed at taming soaring consumer prices, according to data from the Turkish Statistical Institute (TurkStat). But TurkStat’s inflation figures are challenged by ENAG, a group of independent economists.

ENAG said their own calculations put the year-on-year figure at almost 125 percent in April.

The central bank said on Thursday that its monetary policy stance would “be tightened in case a significant and persistent deterioration in inflation is foreseen.”

The bank will maintain tight monetary policy until a significant and lasting decline in inflation is achieved.

Erdoğan long blamed inflation on high interest rates, even though it is the conventional policy at central banks worldwide to raise borrowing costs in order to lower inflation.

But after securing victory in the May presidential election last year, he has returned to economic orthodoxy and put full confidence in his economic team led by Finance Minister Mehmet Şimşek.

Erdoğan has allowed Turkey’s central bank to hike its main policy rate from just 8.5 percent before his re-election last May to 50 percent.

Şimşek said on Wednesday the country’s inflation will fall to 30 percent by the end of the year.

He said the government’s disinflation policy aimed at reducing inflation to single digits is being implemented with success and that the monthly inflation figures have begun to overlap with the government’s inflation goals.

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