UPDATE - Turkey’s central bank keeps interest rates unchanged

UPDATE WITH MORE COMMENTS FROM CENTRAL BANK

By Tuba Sahin

ANKARA (AA) - The Central Bank of Turkey (CBRT) on Wednesday announced it held the policy rate -- one-week repo auction rate -- constant at 24%.

The decision was announced in a statement following the bank's fourth Monetary Policy Committee (MCP) meeting. The bank will hold four more MCP meetings this year.

Recent data shows rebalancing trend in the economy has continued, the bank noted.

"External demand maintains its relative strength while economic activity displays a slow pace, partly due to tight financial conditions," it said.

The bank expected current account balance to maintain its improving trend.

Turkey's current account deficit has dropped to $589 million in March, decreasing by $4.14 billion compared to the same month in 2018.

March figure hit the lowest level since October 2015, while 12-month rolling current account deficit fell to its lowest level -- $12.83 billion -- since the end of 2009 in March, according to the central bank.

On Monday, Anadolu Agency’s Finance Desk survey of 20 economists expected the bank to keep interest rates steady. Among them, four economists expect a decline in interest rates, varying between 0.50 percentage points and 1.50 percentage points.

In April, the CBRT kept its one-week repo rate -- also known as the bank's policy rate -- constant at 24%.

In 2018, the CBRT held nine MPC meetings, as interest rates climbed from 8% to 24% over the course of the year.

Developments in domestic demand conditions and the tight monetary policy support disinflation, the central bank said.

"In order to contain the risks to the pricing behavior and to reinforce the disinflation process, the Committee has decided to maintain the tight monetary policy stance," it said.

Turkey saw an annual hike of 18.71% in consumer prices in May, down 0.79 percentage points from a month earlier, according to latest data from the country's statistical authority TurkStat.

The 12-month average rise in consumer prices was 19.91% as of this May.

As laid out in Turkey's new economic program announced last September, the country's inflation rate target is 15.9% this year, 9.8% next year, and 6.0% in 2021.

According to the latest inflation report by the CBRT, the year-end annual inflation is expected to reach 14.6%, hovering between 12.1% and 17.1%.