TCMB also skipped May
The Central Bank of the Republic of Turkey (TCMB) kept the policy rate unchanged for the second time in a row. The TCMB Monetary Policy Committee (PPK) left the one-week repo rate at 50 percent in May, following April. The decision text stated that additional steps would be taken to sterilize the excess liquidity in the system. The Central Bank of the Republic of Turkey (TCMB) kept the policy rate unchanged at 50 percent. The expectation of the institutions participating in the Bloomberg HT survey was that the interest rate would be kept unchanged at this level. The decision text stated that the main trend of monthly inflation in April showed a limited weakening, and that indicators for the near term also pointed to a slowdown in domestic demand compared to the first quarter. The TCMB emphasized that with these developments, imports of consumer goods increased in April, limiting the improvement in the current account balance. Stating that the high course and rigidity in service inflation, inflation expectations, geopolitical risks and food prices kept inflationary pressures alive, the TCMB stated that it closely monitored the compliance of inflation expectations and pricing behaviors with forecasts. Tight stance and disinflation messages reiterated The CBRT’s decision text reiterated the message that the tight monetary policy stance will be maintained until a significant and permanent decrease is achieved in the main trend of monthly inflation and inflation expectations converge to the forecast range. Reiterating that the monetary policy stance will be tightened in the event of a significant and permanent deterioration in inflation, the CBRT emphasized that the determined stance in monetary policy will reduce the main trend of monthly inflation through balancing in domestic demand, real appreciation in the Turkish lira and improvement in inflation expectations, and that disinflation will be established in the second half of the year. Emphasis on additional measures for excess liquidity While excess liquidity has drawn attention in the system in recent days, the CBRT emphasized additional measures in its interest rate decision text. It was stated in the decision text that additional steps will be taken to protect macrofinancial stability and support the monetary transmission mechanism, considering the recent credit growth and deposit developments. The Bank stated that the excess liquidity formed by the demand of domestic and foreign residents for Turkish lira financial assets will also be sterilized with additional measures.