UPDATE - Turkey’s Central Bank keeps interest rates steady

UPDATES WITH MORE DETAILS

By Tuba Sahin and Aysu Bicer

ANKARA (AA) - The Turkish Central Bank on Thursday held its one-week repo rate – also known as the bank's policy rate – unchanged at 8.25%, keeping it steady for the second straight month.

The decision was announced in a statement following the bank's seventh Monetary Policy Committee (MCP) meeting of 2020.

The move was in line with market expectations, as foreign and local economists had both expected no cut in interest rates.

Pointing to coronavirus developments which substantially weakened global growth in the second quarter, the bank statement stressed that despite a partial recovery in global economic activity in the third quarter thanks to normalization steps, uncertainty in the global economic recovery remains high.

"Although tourism revenues declined due to the pandemic, easing travel restrictions are expected to contribute to a partial improvement," it noted.

The bank also said the recovery in exports of goods and low commodity prices will support the current account balance in the coming periods.

It reiterated that demand-driven disinflationary effects will become more prevalent in the second half of the year, but risks on the end-year projection are considered to be on the upside due to recent developments in inflation.

The bank made it clear that maintaining a sustained disinflation process is a key factor for achieving
lower sovereign risk, lower long-term interest rates, and stronger economic recovery.

"Keeping the disinflation process on track with the targeted path requires the continuation of a cautious monetary stance," it added.

In June, the bank kept its one-week repo rate at 8.25%, following a gradual cut of 375 basis points from 12% in the preceding months.

Last year, in eight MPC meetings, the bank cut the rate by a total of 1,200 basis points, from 24%.

After eight of the meetings last year, this year the bank boosted the number of MPC meetings to 12.