Türkiye’s Central Bank has kept its policy rate unchanged at 37%, maintaining its tight monetary policy stance as it seeks to bring inflation down toward its medium-term target.

Following its latest Monetary Policy Committee meeting, the bank said the one-week repo auction rate would remain at 37%. It also left the overnight lending rate unchanged at 40% and the overnight borrowing rate at 35.5%.

The Committee said recent inflation data and leading indicators point to a continued moderation in the underlying trend of inflation, despite month-to-month fluctuations.

“Recent inflation figures and leading indicators suggest that the underlying trend of inflation is decelerating,” the bank said.

The Central Bank also pointed to signs of weakness in domestic demand, saying economic activity data and the limited pass-through of supply-side shocks into domestic prices supported its assessment.

However, the bank warned that elevated energy prices linked to geopolitical developments pose an upside risk to the inflation outlook. It said it would closely monitor the effects of geopolitical developments on inflation through production costs, economic activity and inflation expectations.

The Committee reiterated that its tight monetary policy stance would remain in place until price stability is achieved. It said the policy stance would support the disinflation process through demand, exchange-rate and expectations channels.

Future interest-rate decisions will be based on realized and expected inflation as well as developments in the underlying inflation trend, with the aim of maintaining the degree of monetary tightness required to keep inflation on its projected downward path.

The Central Bank also stressed that monetary policy decisions would continue to be made on a meeting-by-meeting basis and would remain focused on the inflation outlook.

“If there is a significant and persistent deterioration in the inflation outlook, the monetary policy stance will be tightened,” the Committee said, reiterating its heightened sensitivity to upside risks to inflation.

The bank said it would also deploy additional macroprudential measures if unexpected developments emerged in credit or deposit markets that could weaken the transmission of monetary policy. Liquidity conditions will continue to be monitored closely, while existing liquidity-management tools will be used as necessary.

The Committee reaffirmed its commitment to creating the monetary and financial conditions needed to bring inflation to its medium-term target of 5%.

It said future decisions would be made within a predictable, data-driven and transparent framework.

The full summary of the Monetary Policy Committee meeting is expected to be published within five working days. (ILKHA)