Turkey holds interest rates at 50% despite rising inflation

High angle aerial panoramic view of houses and business centers in Maslak region of Sariyer district, Istanbul, Turkey (Shutterstock)

ALBAWABA - Turkey's central bank intends to maintain its interest-rate pause at 50% for the majority of the year or perhaps even longer, as reported by Bloomberg, with the intention of inducing an economic slowdown to mitigate what is currently among the highest rates of inflation in the world.

The Turkish Statistical Institute's most recent figures shows that in May, the country's annual inflation rate increased to 75.45%, reaching its highest point since November 2022. In accordance with the governor's timetable, the Central Bank also rescheduled the next two monetary policy meetings for July 23 and August 20.

The Turkish Central Bank stated on Thursday that “considering the lagged effects of the monetary tightening, the Monetary Policy Committee has decided to keep the policy rate unchanged, but reiterated that it remains highly attentive to inflation risks,” adding that the downward trend in monthly inflation experienced a brief halt in May.

The bank has stated earlier in comment of declining domestic demand that “in addition to the high level of and the stickiness in services inflation, inflation expectations, geopolitical risks, and food prices keep inflationary pressures alive. The Committee closely monitors the alignment of inflation expectations and pricing behavior with projections,” according to Anadolu Agency.

It has been suggested earlier by Turkish officials that a decreasing trend in inflation may start around June, with the ultimate objective of achieving inflation of 38 percent by the end of the year.

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