TCMB Keeps Policy Rate at 50%, USDT/TRY Remains Stable

• Türkiye Cumhuriyet Merkez Bankası (TCMB) announced its policy interest rate, which was widely expected to remain unchanged at 50%.
• The announcement did not cause significant movement in the U.S. dollar exchange rate against the Turkish lira.
• TCMB stated that the policy rate aims to maintain monetary and financial conditions that will reduce the underlying trend of inflation.

TCMB maintains its policy rate at 50%, emphasizing inflation control.

TCMB’s Interest Rate Decision Reflects Aiming for Inflation Stability

The Central Bank of Turkey (TCMB) has decided to keep its policy interest rate steady at 50%, following the expectations of financial markets. This decision marks the fifth consecutive time the central bank has held the rate at this level, despite changes in its previous management and a series of rate hikes that had been implemented over the past months.

Fluctuations in Inflation and Economic Activities

In the official announcement, TCMB highlighted that the policy interest rate was established to accommodate the monetary and financial conditions that will reduce the underlying trend of inflation, aiming for medium-term targets. The bank noted temporary setbacks in reducing monthly inflation trends, which briefly surged in May. Moreover, domestic demand indicators have shown a deceleration, although demand remains at inflationary levels. The persistently high inflation in services, inflation expectations, geopolitical risks, and volatile food prices contribute to ongoing inflationary pressures.

Market Response and Currency Movement

According to Binance data, the USDT/TRY exchange rate traded around 32.95 following the announcement. The stability in the currency exchange indicates that the market had anticipated the central bank’s decision. As the TCMB continues to monitor inflation expectations and pricing behavior closely, the effectiveness of these measures will be critical in steering the economy towards the targeted inflation rate of 5% in the medium term.

Conclusion

The central bank’s decision to maintain the policy interest rate at 50% demonstrates a commitment to controlling inflation and achieving medium-term economic objectives. With careful monitoring of inflation trends and external economic factors, the TCMB’s actions aim to stabilize the economy and provide a conducive environment for financial stability.