ANKARA
"The inflation outlook lacks the desired improvement," the Turkish Central Bank said in the minutes from its last monetary policy meeting on June 23.
The bank, in a statement released on Tuesday, expects that, "a partial correction in food prices is expected to ease inflation in the short term." However, the bank said the drop in the value of the Turkish lira has delayed improvement in core inflation - price rises excluding those of food and energy. Services prices have also remained high.
The Turkish lira has lost 30 percent of value against the dollar since 2014.
The country's annual inflation rose to 8.1 percent in May from 7.9 percent in April, while annual inflation on a twelve month moving average basis rose to 8.45 percent over the same period, the Turkish Statistics Agency, or TurkStat, said on June 3.
Turkey’s central bank forecasts year-end inflation at 6.8 percent.
The recent fall in the value of the lira, combined with uncertainty in global markets and volatility in energy and food prices, "makes it necessary to maintain a cautious stance in monetary policy. The Committee has therefore decided to keep the interest rates at current levels," the bank said.
Future monetary policy decisions will be 'conditional on the inflation outlook’, the bank stated.
The bank’s statement was an indication of the course of discussion at the last Monetary Policy Committee meeting on June 23, the meeting at which the decision to leave interest rates on hold was made.
The bank said that structural measures to enhance the resilience of the financial system are important.
"Accordingly, the Committee assessed that the measures implemented to support the FX liquidity, core liabilities, and long-term borrowing have enhanced the resilience of the economy against global shocks. Additional measures along these lines may be adopted if deemed necessary."
The bank also said that developments in fiscal policy and tax adjustments are monitored closely with regard to their effects on the inflation outlook.
"Sustained fiscal discipline has become a fundamental element in reducing the sensitivity of the Turkish economy against external shocks in recent years. In the current environment of highly uncertain global markets, the value added from maintaining and further advancing these achievements is significant."
"Any measure that would ensure the sustainability of the fiscal discipline and reduce the savings deficit will support macroeconomic stability and contribute positively to social welfare by keeping interest rates of long‐term government securities at low levels," the bank said.
