ISTANBUL, June 12 (Reuters) - Turkeyâ€™s central bank on Wednesday left its key interest rate unchanged at 24% as expected and said it will keep its p
ISTANBUL, June 12 (Reuters) – Turkeyâ€™s central bank on Wednesday left its key interest rate unchanged at 24% as expected and said it will keep its policy stance tight to â€œreinforce the disinflation process,â€ a somewhat more upbeat assessment than its past statement.
â€œDevelopments in domestic demand conditions and the tight monetary policy support disinflation,â€ the central bank said in a statement after its monetary policy committee (MPC) meeting.
It will maintain this stance, it added, â€œin order to contain the risks to the pricing behaviour and to reinforce the disinflation process.â€
In the statement after its previous MPC meeting in April, the central bank cited only â€œsome improvement in inflation indicatorsâ€ and said its stance would be maintained until the inflation outlook â€œdisplays significant improvement.â€
Annual inflation has eased a 15-year peak of 25.24% in October, to 18.71% in May.
The central bank last hiked the repo rate in September to support the lira in the face of a currency crisis which tipped the economy into recession. The economy contracted 2.6% year-on-year in the first quarter.
On Wednesday the bank held its one-week repo rate at 24%, having raised it by 11.25 percentage points last year. In a Reuters poll, 14 economists had said they expected the rate to be kept steady while two predicted a cut.
The lira firmed slightly to 5.8100 against the dollar after the central bank announcement, 5.8155. The currency has partially rebounded levels above 6 against the dollar this month as concerns about U.S.-Turkey ties eased somewhat.
The statements suggests the central bank is edging toward a rate cut later this year, as expected.
At its April 25 meeting, the bank ped a previous reference to possible further tightening if needed to address inflation, a dovish shift which at the time hit the lira.
Last year the lira weakened nearly 30% against the dollar over worries about diplomatic tensions with the United States and the central bankâ€™s independence, with President Tayyip Erdogan pressing for lower borrowing costs to boost growth.
The currency has weakened another 9% this year on renewed U.S. strains and political uncertainty generated by a re-run on June 23 of a mayoral election in Istanbul, after Erdoganâ€™s AK Party narrowly lost the initial vote. (Reporting by Ezgi Erkoyun and Ali Kucukgocmen; Writing by Daren Butler; Editing by Jonathan Spicer)