Economy Turkey holds interest rate at 50% despite inflation risks By Pramod Kumar June 28, 2024, 3:27 AM Shutterstock Geopolitical risks and food prices are helping keep inflationary pressures alive, said Turkey's central bank Turkey’s central bank maintained its benchmark interest rate at 50 percent and will retain a tight monetary stance until inflation is tamed. The last 500 basis points rise to the benchmark rate was announced in March following a deteriorating inflation outlook. The rate has been hiked by 4,150 basis points since June 2023 to ease inflation and stimulate economic growth. NewsletterGet the Best of AGBI delivered straight to your inbox every week NewsletterGet the Best of AGBI delivered straight to your inbox every week “The decline in the underlying trend of monthly inflation registered a temporary pause in May,” the bank said in a statement. However, inflation expectations, geopolitical risks, and food prices keep inflationary pressures alive. The bank stated that its monetary policy stance will be tightened if a significant and persistent deterioration in inflation is foreseen. Additional macroprudential measures will support the monetary transmission mechanism in case of unanticipated developments in credit and deposit markets, it added. The central bank is aiming at disinflation in the second half of the year through moderation in domestic demand, real appreciation in the Turkish lira, and improvement in inflation expectations. Turkish retailers’ confidence wavers as inflation bites Turkey announces plans to drop cap on rent increases Unemployment rate falls in Turkey but warnings persist The government is expecting to reach the 5 percent inflation target in the medium term by making necessary monetary and financial decisions. May’s business confidence report, released by statistics agency Turkstat this week, showed sentiment in the retail sector at its lowest level for more than two years. It fell by 3 percent, from 115.5 points to 111.7. Despite the drop, sentiment remains well above the 100-point dividing line between an optimistic and a pessimistic outlook. Turkey’s central bank has projected year-end inflation of 38 percent, down from May’s 75 percent. In mid-June ratings agency Fitch forecast Turkey’s economy will expand by 3.5 percent in 2024, up from its earlier estimate of 2.8 percent. Register now: It’s easy and free AGBI registered members can access even more of our unique analysis and perspective on business and economics in the Middle East. Why sign uP Exclusive weekly email from our editor-in-chief Personalised weekly emails for your preferred industry sectors Read and download our insight packed white papers Access to our mobile app Prioritised access to live events Register for free Already registered? Sign in I’ll register later
