CBRT announces: May interest rate decision is in

The Central Bank of the Republic of Türkiye (CBRT) Monetary Policy Committee (MPC) has announced the interest rate decision that the markets were eagerly awaiting.

The committee, which met under the chairmanship of CBRT Governor Fatih Karahan, kept the interest rate steady at 50 percent in May, in line with expectations.

The policy rate had been kept steady at the meeting held last month.

The following statements were included in the announcement made by the CBRT:

"The underlying trend of monthly inflation showed a limited weakening in April. Indicators for the near term have pointed to a slowdown in domestic demand compared to the first quarter. However, imports of consumption goods increased in April, limiting the improvement in the current account balance. The high level and stickiness of 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 and domestic demand are being closely monitored. The Committee has decided to keep the policy rate constant, taking into account the lagged effects of monetary tightening, while reiterating its cautious stance against upside risks to inflation. The tight monetary policy stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is achieved and inflation expectations converge to the projected forecast range. In case of a significant and sustained deterioration in inflation, the monetary policy stance will be tightened. The decisive stance in monetary policy will reduce the underlying trend of monthly inflation through the rebalancing of domestic demand, real appreciation of the Turkish lira, and improvement in inflation expectations, and disinflation will be established in the second half of the year.

Within the scope of the aim of simplifying the macroprudential framework and increasing the functionality of the market mechanism, the securities maintenance practice has been terminated. Considering recent credit growth and deposit developments, additional steps will be taken to protect macro-financial stability and support the monetary transmission mechanism. The liquidity surplus arising from the demand of domestic and foreign residents for Turkish lira financial assets will be sterilized with additional measures.

The Committee will determine its policy decisions in a way that will provide the monetary and financial conditions that will reduce the underlying trend of inflation and reach the 5 percent target in the medium term, taking into account the lagged effects of monetary tightening.

Indicators regarding inflation and the 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.

The Committee will take its decisions within a predictable, data-driven, and transparent framework."