Turkey's Central Bank holds interest rates steady, warns of July inflation rise

Turkey's Central Bank (TCMB) maintained its key policy rate at 37% during its July meeting, holding the one-week repo auction rate steady. The Monetary Policy Committee, led by Yaşar Fatih Karahan, also kept the overnight lending rate at 40% and the overnight borrowing rate at 35.5%.

The bank's statement highlighted that while the main trend of inflation saw a limited decrease in June, preliminary data indicates a temporary increase in July. This projected rise is attributed to geopolitical developments that are influencing energy prices. The TCMB also pointed to signs of weakening domestic demand in recent data.

Emphasizing its commitment to price stability, the central bank reiterated that it will sustain a tight monetary policy. However, it issued a clear warning: if there is a significant and persistent deterioration in the inflation outlook, the monetary policy stance will be tightened further. The committee stressed its cautious approach, stating that policy decisions will be made based on inflation outcomes, underlying trends, and expectations, ensuring the necessary tightness for disinflation.