Turkish central bank holds all rates steady, maintains tight policy
ISTANBUL, June 19 (Reuters) - Turkey's central bank held its key interest rate steady, opens new tab at 46% on Thursday, as expected and also kept the upper band of its rate corridor at 49% despite predictions it would be lowered.
The central bank's somewhat hawkish rates move effectively prolongs a policy pause ahead of an expected resumption of rate cuts that could come this summer.
The bank said inflation should continue to decline and growth should slow.
"The tight monetary stance will be maintained until price stability is achieved via a sustained decline in inflation," the bank's policy committee said, repeating its past position.
"The underlying trend of inflation declined in May. Leading indicators suggest that this decline continues in June," it added. "Data for the second quarter point to a slowdown in domestic demand."
In April, the central bank raised its policy rate to 46% from 42.5%, reversing an easing cycle that had begun in December following market volatility over the arrest of Istanbul's mayor in March.
The overnight funding rate has been increased by 700 basis points since the mayor's arrest, but in the last week it has dipped to near the policy rate in what analysts said was a signal the bank was preparing the ground for eventual rate cuts.
"The bank has shifted its tone to prepare markets for the beginning of a rate-cutting cycle," said Andrew Birch, Economics Associate Director at S&P Global Market Intelligence.
"If the central bank intends to meet its 24% end-year inflation target, it will need to be cautious in lowering interest rates, due to ongoing market uncertainty."
In a Reuters poll, economists had expected the central bank to keep the one-week repo policy rate steady but cut the overnight lending rate - the upper band - by 150 basis points to 47.5%. Instead, it was held at 49%.
A rate cut is seen as a possibility at the next meeting, on July 24. Reuters polls show that the easing cycle, once restarted, will continue until at least mid-2026.
In May, the central bank held its year-end inflation forecast steady at 24% and vowed to tighten policy if inflation worsens. Annual inflation declined to 35.4% last month.
The central bank said it will adjust policy rate prudently and on a meeting-by-meeting basis and will use all monetary policy tools effectively in case of deterioration in the inflation path.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
3 hours ago
- Reuters
Oil, war and tariffs tear up markets' central bank roadmap
LONDON, June 19 (Reuters) - Investor unease about an increasingly uncertain environment is rising, as Norway's shock rate cut on Thursday highlights how U.S. tariffs, Middle East conflict and a shaky dollar make global monetary policy and inflation even harder to predict. Norway's crown slid roughly 1% against the dollar and the euro , in a sign of how unexpected the move was. And Switzerland, which cut borrowing costs to 0% on Thursday, confounded some expectations among traders for a return to negative rates in the deflation-hit nation, as its central bank warned of a cloudy global outlook. Just a day earlier the U.S. Federal Reserve kept rates on hold and chair Jerome Powell said "no one" had conviction on the rate path ahead. The conclusion for markets: monetary policy uncertainty is one more headwind to navigate against a backdrop of geopolitical and trade risks. Global stocks pulled away from recent peaks, a gauge of expected volatility in European equities (.V2TX), opens new tab touched a two-month high as stocks across the region fell and government bonds, usually geopolitical risk havens, sold off. "We're at a moment of considerable policy and macro uncertainty," said BlueBay chief investment officer at RBC Global Asset Management Mark Dowding. "We can't see a clear trend on interest rates," he added, which meant he was holding back from active market bets across the group's investment portfolios. Volatility was set to rise, some investors said, because a choppy dollar and oil prices whipped around by geopolitics meant that central banks were far less able to provide markets and investors a clear route map for the future. "You cannot just take your cues from the central banks anymore as they are facing a harder job of reading the economy themselves," T.S. Lombard director of European and global macro Davide Oneglia said. Rate-cutting European central banks are not just diverging from the Fed, which is grappling with the inflationary risks of President Donald Trump's tariffs. They are also struggling to navigate a new era where the dollar , the lynchpin of world trade, commodity prices and asset valuations, has turned weaker and more volatile under trade war stress and government debt anxiety. "That's a massive, massive fundamental shift in global markets that everyone is trying to assess," Monex Europe head of Macro Research Nick Rees said. "All of those standard economic rules of thumb we use for forecasting are completely broken right now." The dollar is down almost 9% against other major currencies this year but has risen following the outbreak of a war between Israel and Iran. European Central Bank policymaker Francois Villeroy de Galhau said on Thursday the ECB might have to adapt its rate cut plans if oil price volatility was long-lasting. The new status quo in markets could well be an era of central bank surprises that create rapid shifts in the market narrative, asset pricing and volatility trends, analysts said. "We're getting into this next cycle in which variables are much more volatile, because, rather than (monetary policy) being just easily predictable, events just take over and policy and human factors, as we now know with Donald Trump, play an important role," Oneglia said. Norway's surprise cut came because the crown was a "runaway top currency" of the trade-war era, added Societe Generale's head of FX strategy Kit Juckes. With investors chasing around the world to identify stores of wealth that are not U.S. dollars, meanwhile, the Swiss franc has soared, cutting the costs of imports and pushing the economy into deflation. On Thursday, the franc rose against the dollar as traders saw the SNB's cut as too small to keep deflation at bay. Ninety One multi-asset head John Stopford said the hazard risk was rising for global stocks and that options products that aim to offer protection from incoming volatility looked fairly cheap. He was buying bonds issued in nations where inflation and rates could come down materially, such as New Zealand, but was negative on longer-dated U.S. Treasuries and German Bunds where economic uncertainty was higher and government borrowing was likely to rise. Global stocks (.MIWD00000PUS), opens new tab remain almost 20% above their April trough, after investors relaxed about tariffs. Stopford said there was more to worry about in the short term. "The stock market feels like it's a thatched house in a hot country with a fire hazard risk, and people aren't charging much to insure the house," Stopford added.
Reuters
3 hours ago
- Reuters
UK services inflation is proving sticky, BoE's Lombardelli says
LONDON, June 19 (Reuters) - Bank of England Deputy Governor Clare Lombardelli said on Thursday that British services price inflation - a key measure of domestic price pressures - remained "sticky" despite data showing a slight fall in May. Lombardelli, who was speaking after the central bank kept interest rates at 4.25% in a 6-3 vote split earlier on Thursday, also said the slowdown in Britain's labour market was as expected. "We've seen a rise in a number of elements of inflation. Services inflation is proving to be quite sticky, but we've also seen recent rises in energy prices, other regulated prices," Lombardelli told reporters. "We are seeing some broad weakening in the labour market. I mean, this is in line with what we expected, and actually quite similar to what we set out in our latest Monetary Policy Report in May, but it's important that we consider those changes," she added. Figures published on Wednesday showed British inflation fell to 3.4% in annual terms in May, and service price inflation cooled more than expected to 4.7% from 5.4% in April.
Daily Mail
4 hours ago
- Daily Mail
4 most overpriced burger chains in the US
Fast-food is no longer as affordable as it used to be, with inflation hitting a record high. Personal finance outlet FinanceBuzz recently revealed the price increases of multiple burger chains over the past decade. The rate of inflation at fast food restaurants seen since 2014 is as follows: McDonald's - 100%, Popeyes - 86%, Taco Bell - 81%, Chipotle - 75%, Jimmy John's - 62%, Arby's, Burger King, Chick-fil-A and Wendy's - 55%, Panera - 54%, Subway and Starbucks - 39%. Historically, fast-food restaurants increased prices by about 2% annually, however since 2022 things changed. McDonald's What better way to start off with a classic! Five years ago, a cheeseburger at McDonald's cost $1. Today, that price has doubled, if not more. According to the Victoria Advocate, that same burger is now $3.15 in South Texas. That reveals a 215% increase. Earlier in the year, a McDonald's restaurant was blasted for its "outrageous" pricing after someone paid more than $7 for an Egg McMuffin. Reddit users also complained about the increased prices with one slamming a $13 Quarter Pounder meal and a $12 Big Mac meal. This has caused frustration amongst the food chain's customers with some even stating that they will not be returning. Five Guys Five Guys drew attention for it high prices earlier in the year where customers claimed they were out of control as it cost $24 for one person. The order, a bacon cheeseburger meal with a regular soda and a small fry, was nearly $22 before tip. '5 guys is the most overpriced burger in the market. I never order from there unless I have a 50% Uber eats discount,' one X user posted in March. 'It's just not worth it at full price.' A burger, fries and soda at Five Guys will cost you $20 on average, according to MoneyGeek, Wendy's Back in February, Wendy's made headlines when its CEO Kirk Tanner announced a new idea to investors which involved 'surge pricing.' That meant that based on demand, menu prices would increase depending on the time of day you would visit the restaurant. Customers would therefore be charged more if they visited during the lunchtime or dinner rush, meaning at least $1 more for a burger. Burger King Three years ago, Burger King customers could get a Whopper meal with a small drink and small fries for $5 with a coupon. Now, that same meal runs for $6.99, though it does come with large sides instead. Family meal deals also saw a big increase. In 2021, $13 would get you three Whoppers, three cheeseburgers, and three small fries. Today, the price has reached $19.99 with medium-sized fries.
