Turkey Central Bank Maintains Policy Stance Even as Inflation Jumps Close to 80%

By Nihad Ahmed

The Turkish central bank on Thursday held its policy rate at 14% despite a continued surge in the inflation rate and a global shift toward monetary tightening.

Sharp falls in the lira, hikes to natural gas and electricity prices, and the shock to commodity markets from the war in Ukraine have propelled Turkey’s inflation rate to the highest level in more than two decades. The consumer price index rose 78.6% in June compared with 73.5% in May.

The central bank has kept its benchmark rate constant since December 2021 following an easing cycle. Policy makers have rejected rate increases in response to the steep climb in inflation, relying instead on macroprudential measures aimed at stemming the rapid pace of credit growth.

The central bank said in its statement that “despite losing momentum, credit growth, and allocation of funds for real economic activity purposes are [being] closely monitored.”

“The committee will continue to implement the strengthened macroprudential policy set decisively and take additional measures when needed,” it said.

The bank said the comprehensive review of the policy framework continues with the aim of encouraging “permanent and strengthened liraization” in all of its policy tools.

Increasing macro and external risks prompted Fitch Ratings earlier this month to downgrade Turkey’s sovereign debt rating further into junk territory. The ratings agency cited government policy in contributing to spiraling inflation, lira depreciation pressures and discouraging capital inflows.

Write to Nihad Ahmed at [email protected]

(END) Dow Jones Newswires

07-21-22 0726ET