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Turkey’s central bank again keeps interest rates steady at 50 percent

This photograph taken on June 9, 2023, shows the central bank of Turkey, in Ankara. (Photo by Adem ALTAN / AFP)

Turkey’s central bank on Tuesday kept its key interest rate unchanged for the fifth month in a row, with annual inflation recorded at over 60 percent in July, the state-run Anadolu news agency reported.

The bank’s monetary policy committee said it had decided to keep the policy rate constant at 50 percent but would remain attentive to inflation risk.

The committee said it would stick to its tight monetary policy until there is a significant and permanent fall in monthly inflation and the annual inflation level falls to a level within expectations.

According to the Turkish Statistical Institute (TurkStat), Turkey’s annual rate of inflation slowed sharply in July to 61.78 percent from above 71 percent in June. However, the monthly inflation rate rose to 3.23 percent from the 1.64 percent a month earlier.

Turkey has been battling a cost-of-living crisis that prompted President Recep Tayyip Erdoğan to drop his opposition to interest rate hikes to combat inflation.

The central bank began to raise its key rate in June 2023, gradually taking it from 8.5 percent to 50 percent.

The last time the central bank increased the key rate was in March.

Central Bank Governor Fatih Karahan told Reuters in an interview last month that the central bank is determined to combat soaring prices and will stick patiently to its tight policy stance.

“We will maintain tightness and wait for data and expectations to get in line with our disinflation path. We think we still have some ways to go in this regard,” Karahan said.

“We want to see a significant and sustained fall in the underlying trend of monthly inflation. We are determined to bring down inflation,” Karahan said in the interview, his first with the media since becoming central bank chief in February.

The central bank expects disinflation to take hold in the second half of the year and forecasts an end-year rate of 38 percent, due to its tight policy stance. Economists polled by Reuters expect the inflation rate to fall to around 42 percent by yearend.

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