The Turkish Central Bank (CBRT) maintained its tight stance in the August Monetary Policy Committee (MPC) decision. However, it pointed out that the inflationary pressure of domestic demand has diminished and drew more attention to inflation expectations and the rigidity in services inflation compared to previous texts.
As expected, the Central Bank’s Monetary Policy Committee left the policy rate unchanged at 50 percent at its August meeting. The market was expecting guidance in this month’s MPC text for the start of the policy rate cuts, which has been constantly discussed by the market observers.
In the MPC text, the Central Bank emphasized that it will maintain its tight monetary policy stance until a significant and lasting decline in the underlying trend of monthly inflation is achieved and inflation expectations converge to the projected forecast range. The Central Bank also kept the statement that it would tighten the monetary policy stance in case of a significant and permanent deterioration in inflation. However, economists noted that there was a softening in the text despite everything.
Experts said that the text drew attention, especially to services inflation and inflation expectations and that a rate cut cannot be discussed until these are at the desired level. Expectations have increased that guidance for a rate cut will be given at the October meeting at the earliest and the possibility of a rate cut decision at the January 2025 meeting.
