Turkey’s Central Bank holds interest rate at 50%

ANKARA — Turkey’s Central Bank kept interest rates steady on Thursday as the country’s inflation remains persistent.

The Monetary Policy Committee left the rate at 50%, citing a downtrend in domestic demand. 

"Indicators for the last quarter suggest that domestic demand continues to slow down, reaching disinflationary levels," the committee said in a statement after its monthly meeting. "While core goods inflation remains low, signs for an improvement in services inflation have become more apparent."

Turkey’s year-on-year inflation fell less than expected, to 48.6%, and month-on-month consumer prices increased by larger than expected, 2.9%, according to data released by the Turkish Statistical Institute earlier this month.

“The tight monetary 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,” the statement said.

The Central Bank revised its year-end projection on inflation from 38% to 44% this month. 

Economists had widely expected the decision to keep rates steady, according to a survey by Bloomberg and others released earlier this week. 

The bank benchmark interest rate has held steady at 50% since April. 

With Turkey facing one of the worst cost-of-living crises in its history, the Central Bank raised borrowing costs from 8.5% to 50% in an aggressive run of hikes between June 2023 and March 2024 as part of President Recep Tayyip Erdogan’s return to orthodox economic policy.

Before being reelected in May 2023, Erdogan had insisted on keeping interest rates stubbornly low despite soaring inflation.