As widely expected, the Central Bank of Turkey left its key interest rates unchanged on November 20 as it struggles to keep stubbornly high inflation under control.

The Central Bank kept its one-week repo rate (main rate) at 8.25%, its overnight lending rate at 11.25%, and the overnight borrowing rate at 7.50%.

Macroprudential measures taken at the beginning of the year and the tight monetary policy stance continue to have a favourable impact on the core inflation trend, the Bank said in a statement released after the Monetary Policy Committee meeting, reiterating that elevated food prices delay the improvement in the inflation outlook. It should be noted that the Central Bank’s statement included the following sentence “the Committee anticipates that, under the current monetary policy stance, inflation will decline in line with the forecast presented in the Inflation Report throughout 2015”, showing its confidence in its policies. In the statement released after the October 23 MPC meeting, the Bank only said that current levels of commodity prices, in particular declining oil prices, were expected to contribute to disinflation foreseen for the next year. In the inflation report released in November the Central Bank raised its inflation forecasts for 2014 to 8.9% from a previous 7.6% and to 6.1% from a previous 5% for 2015, but said that inflation was expected to stabilize around 5% in the medium term.

The Bank reiterated that inflation expectations, pricing behaviour and other factors that affect inflation will be closely monitored and the tight monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook.

Global demand remains weak, while the contribution of domestic demand to growth is increasing, the Bank also said, adding that the moderate course of consumer loans and the favourable terms of trade may contribute to the improvement in the current account balance.