The Central Bank this week kept its headline interest rate unchanged at 50 percent.

The tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations converge to the projected forecast range, the bank said in a statement.

“Considering the lagged effects of the monetary tightening, the committee decided to keep the policy rate unchanged but reiterated that it remains highly attentive to inflation risks,” it added.

Monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen, the bank reiterated.

As part of its effort to bring rampant inflation under control, the Central Bank hiked the key interest rate from 8.5 percent to 50 percent since June 2023.

The decisiveness regarding tight monetary stance will bring down the underlying trend of monthly inflation through moderation in domestic demand, real appreciation in Turkish Lira and improvement in inflation expectations, the bank said on July 23. “Consequently, the disinflation process will gain strength.”

Annual inflation slowed from 75.45 percent in May to 71.6 percent in June, with consumer prices rising 1.64 percent month-on-month. The Central Bank forecasts a year-end inflation rate of 38 percent.

Leading indicators suggest that monthly inflation will rise temporarily in July due to adjustments in administered prices and taxes as well as supply-side factors in unprocessed food prices, which are relatively beyond the control of monetary policy. However, the rise in the underlying inflation is expected to be relatively limited, according to the bank.