Turkiye's Central Bank on Thursday kept its one-week repo rate – also known as the policy rate – steady at 14%, in line with market forecasts.
"Increase in inflation in the recent period has been driven by distorted pricing behavior due to unhealthy price formations in the foreign exchange market, supply side factors such as the rise in global food and agricultural commodity prices, supply constraints, and demand developments," the bank said in a statement following its first Monetary Policy Committee (MPC) meeting this year.
The committee expects the disinflation process to begin in the wake of measures taken for sustainable prices and financial stability, along with "the decline in inflation owing to the base effect."
The bank said that the comprehensive review of the policy framework is being conducted with the aim of prioritizing Turkish lira in all policy tools of the Turkish Central Bank in order to create a foundation for sustainable price stability.
It underlined that capacity utilization and other leading indicators show that domestic economic activity remains strong, with the help of robust external demand.
The new coronavirus variants and increasing geopolitical risks keep the downside risks to global economic activity alive, the bank said, adding that global demand, commodity prices, supply constraints and transportation costs have led to rise in producer and consumer prices globally.
All economists surveyed by Anadolu Agency on Friday predicted the policy rate would be kept constant at 14%.
Foreign financial institutions also expected the bank to keep interest rates stable.
Societe Generale expected no change in the interest rate, while Unicredit forecast the bank would avoid a decision that would trigger the depreciation of Turkish lira, keeping the policy rate at 14%.
Bank of America also expected the bank to keep the policy rate constant until the end of the first quarter.
Earlier, Treasury and Finance Minister Nureddin Nebati had said that inflation would reach its peak in January, but there would be a decrease as of May thanks to developments in the world and decline in food and energy prices.
Turkiye posted a 36% annual hike in consumer prices in 2021, the highest in 19 years.
At its last meeting on Dec. 16, the central bank cut its benchmark one-week repo rate by 100 basis points from 15% to 14% in line with market expectations, meaning that since September 2021 the key rate has been lowered by 500 basis points.
