The Central Bank of the Republic of Türkiye (CBRT) announced on Thursday that it has kept its benchmark one-week repo rate unchanged at 46%, maintaining its tight monetary policy stance in an effort to drive inflation toward its medium-term target.

The Monetary Policy Committee (MPC) also left the overnight lending and borrowing rates unchanged at 49% and 44.5%, respectively.

The CBRT noted that the underlying trend of inflation declined in May, with early indicators suggesting the downward trend has continued into June. However, the Bank cautioned that inflation expectations and pricing behavior still pose risks, and that potential geopolitical tensions and growing global trade protectionism could affect the path of disinflation.

“Data for the second quarter point to a slowdown in domestic demand,” the statement read, reinforcing the central bank’s belief that tight monetary conditions are beginning to cool the economy.

The Bank emphasized that the tight monetary stance is contributing to disinflation through reduced domestic demand, appreciation of the Turkish lira, and improved inflation expectations. It reaffirmed its commitment to maintaining tight conditions until a sustained decline in inflation is achieved, targeting a 5% inflation rate in the medium term.

The MPC stated that it will determine future rate decisions on a meeting-by-meeting basis, based on realized and expected inflation and the broader disinflation trend.

The CBRT pledged to use all available monetary policy tools decisively if a “significant and persistent deterioration” in the inflation outlook occurs. It also signaled potential macroprudential measures to support the monetary transmission mechanism in case of unexpected developments in credit and deposit markets.

Additionally, the Bank emphasized the importance of coordinated fiscal policy in supporting the ongoing disinflation process.

The MPC reiterated its data-driven approach and commitment to predictable and transparent policy-making. A summary of the Committee’s meeting will be published within five working days. (ILKHA)