Turkey’s Central Bank holds interest rates steady after aggressive hikes

Turkey’s Central Bank on Thursday kept interest rates at 45% as expected, pausing a monetary tightening cycle after eight straight months of rate hikes, but it maintained its commitment to resume tightening should the inflation outlook continue to deteriorate.

“The monetary policy stance will be tightened in case a significant and persistent deterioration in the inflation outlook,” said the bank’s Monetary Policy Committee in a statement after its monthly meeting.

“The current level of the policy rate will be maintained until there is a significant and sustained decline in the underlying trend of monthly inflation,” it added.

The committee cited continued “moderation” in domestic demand as well as a series of other factors in explaining its decision to hold the rates steady.

The decision was widely expected, with the bank’s management earlier this month signaling that it would pause the hikes after eight consecutive increases that gradually raised the country’s policy rates from 8.5% to the current level between last June and this January.

Thursday’s Monetary Policy Committee meeting marked the first one held under the bank’s new governor, Fatih Karahan, who took over the post after his predecessor, Gaye Erkan, resigned earlier this month amid charges of misconduct. The claims include her father, Erol Erkan, allegedly meddling in the bank’s decision-making processes without holding an official position. Erkan was replaced on Feb. 2.

Karahan previously served as Erkan’s deputy and had been brought on board in July along with two deputy central bank chiefs, Cevdet Akcay and Hatice Karahan, as part of a major overhaul of the country’s economy management after President Recep Tayyip Erdogan’s reelection in May.

With Turkey facing one of its worst cost-of-living crises, Erdogan, after the elections, abandoned his unconventional monetary policy of keeping interest rates low despite skyrocketing inflation and appointed mainstream economists at the helm of the economy.

Turkey’s year-on-year inflation soared to 64.86% in January, with monthly consumer prices increasing by 6.7%, according to official data.

This is a breaking story and has been updated since its initial publication.