Turkish Central Bank vows tight policy as growth and inflation outlook turns darker

The Central Bank has shown signals of refocusing on price stability and hinted that it foresees that Turkish economic growth will lose momentum in the second half of the year, bankers and economists said after a meeting with Bank authorities.

“Inflation expectations, pricing behaviors and other factors affecting the inflation will be watched closely,” the Central Bank officials said in an Aug. 28 presentation in Ankara, addressing economists and bankers.

“The tight stance on monetary policy will be maintained by keeping the yield curve near horizontal until seeing a remarkable improvement in inflation outlook,” the Bank stated.

The presentation also noted that the main indicators point to a slight slowdown in Turkey’s economic growth.

“The survey indicators regarding growth signal a little momentum loss in economic activities, considering the potential impacts of geopolitical risks,” it said.

The meeting with economists came a day after the Monetary Policy Board meeting, in which the Bank left its key policy, benchmark weekly repo rate, unchanged at 8.25 percent after cutting the rate by a total of 175 basis points over the past three meetings.

The Bank opted to maintain the overnight borrowing rate as the inflation figures of the past few months failed to meet expectations, despite the diminishing impact of the Lira’s value loss on the price changes.

Earlier this month, the Central Bank said the inflation forecasts from its monthly survey had risen to 8.7 percent at the end of the year from 8.3 percent previously, despite its aggressive rate hike in January.
The Bank still surprised the markets by lowering its overnight lending rate by 75 points to 11.25...