Turkish Central Bank Keeps key Interest Rate Steady for Second Month

The Turkish Central Bank kept on Thursday the key interest rate unchanged for the second month in a row despite the rise in inflation in Turkey.

The Central Bank Monetary Policy Committee said it decided to keep the interest rate fixed at 50%, while paying attention to inflation risks.

Ahead of local elections on March 31, the central bank raised the key interest rate from 45% to 50% as inflation weighs on President Recep Tayyip Erdogan's government.

Inflation reached 69.8% on an annual basis in April in Turkey, according to official figures published in early May.

The Turkish Central Bank said Thursday that its monetary policy stance “will be tightened if a significant and sustained deterioration in inflation is expected.”

Turkish Finance Minister Mehmet Şimşek said on Wednesday that inflation will begin to decline after reaching its peak in May.

He explained to Turkish media, “As of the summer months, inflation will decline very quickly.”

Last week, the Turkish government announced a three-year plan aimed at reducing public spending to get out of inflation, which reached 70% on an annual basis in April.

The government explained that the plan provides for significant austerity in the budget of the “entire public sector,” and some of these restrictions require legislative changes that will be presented to Parliament.