May 27, 2024
The Monetary Policy Committee (the Committee) has decided to keep the policy rate (the one-week repo auction rate) constant at 50 percent.
The underlying trend of monthly inflation registered a limited decline in April. Recent indicators point to a slowdown in domestic demand compared to the first quarter. Meanwhile, consumption goods imports increased in April, limiting the improvement in the current account balance. 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.
The effects of monetary tightening on credit conditions and domestic demand are closely monitored. Considering the lagged effects of the monetary tightening, the Committee decided to keep the policy rate unchanged, but reiterated that it remains highly attentive to inflation risks. 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. Monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen. The decisiveness regarding tight monetary stance will bring down the underlying trend of monthly inflation through moderation in domestic demand, real appreciation in Turkish lira, and improvement in inflation expectations. Consequently, disinflation will be established in the second half of the year.
Within the scope of simplifying the macroprudential framework and enhancing the functionality of the market mechanism, the securities maintenance practice has been terminated. Considering the recent developments in credit growth and deposits, additional steps will be taken to preserve the macro financial stability and to support the monetary transmission mechanism. The excess liquidity stemming from the surging domestic and foreign demand for Turkish lira financial assets will be sterilized through additional measures.
Taking into account the lagged effects of monetary tightening, the Committee will make its policy decisions so as to create the monetary and financial conditions necessary to ensure a decline in the underlying trend of inflation and to reach the 5 percent inflation target in the medium term.
Indicators of inflation and underlying trend of inflation will be closely monitored and the Committee will decisively use all the tools at its disposal in line with its main objective of price stability.
Source: Central Bank of the Republic of Türkiye
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