MPC: Not much new or unexpected

TURKEY - In Brief 19 Jun 2025 by Murat Ucer

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The CBRT/MPC maintained the policy rate (one-week repo auction rate) as well as the O/N lending and borrowing rates at 46%, 49% and 44.5%, respectively, as expected. The content of the statement was little changed as well (link here and here to the new and old statements, respectively). The CBRT implies that domestic demand is now more supportive of disinflation, having revised the wording to “[d]ata for the second quarter point to a slowdown in domestic demand” from “level of domestic demand above projections despite some loss of momentum in the first quarter”, previously. As for the risks to the inflation outlook, the Bank rightly points to “[p]otential effects of the geopolitical developments and the rising protectionism in global trade” while keeping the reference to “inflation expectations and pricing behavior” as continued sources of risks to the disinflation process. Finally, as regards guidance on the monetary policy stance, also unsurprisingly, the Bank reverted back to the pre-shock, March 6 meeting language “[a]ll monetary policy tools will be used effectively in case a significant and persistent deterioration in inflation is foreseen”, from the more hawkish April wording of: “[m]onetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen”. Parenthetically, it reiterated the earlier statement that “[t]he Committee will adjust the policy rate prudently on a meeting-by-meeting basis with a focus on the inflation outlook”. Looking ahead, as we’ve written earlier, we expect the CBRT to start lowering the policy rate next month (July 24), barring major political-cum-geopolitical shocks, probably by around a ...