Core inflation indicators continued to decline in February, however, the current course of food prices and the exchange rate developments are the key risk factors regarding the inflation outlook, the Central Bank said on March 24 in the minutes of its latest monetary policy committee (MPC) meeting, adding that indicators for March signal that the annual food inflation will remain high and the inflation will hover above the level indicated in the January Inflation Report for some time.

On March 17, the Central Bank has kept its main rate (one-week repo) steady at 7.50% and left its overnight lending rate and borrowing rate unchanged at 10.75% and 7.25%, respectively.

The committee expects energy prices to have a less constraining effect on annual consumer inflation due to soaring prices of fuel and bottled gas amid the TRY depreciation in March.

The developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance in January and the monetary authority expects current account balance to improve further throughout 2015. Indicators for the labor market point to no significant recovery in employment as of the first quarter of 2015, the Bank commented, adding that economic activity lost some momentum in the first quarter of the year as a result of the weak external demand, the volatile financial markets and adverse weather conditions. The committee also said that recent indicators suggest that private domestic demand has contributed moderately to growth albeit at a slower pace in the first quarter of 2015. The Committee will monitor the data closely for a while before making a more definitive assessment regarding the underlying trend of economic activity.