ISTANBUL, Aug 21 (Reuters): Turkey's central bank held interest rates steady at 50 per cent for a fifth straight month on Tuesday as expected, and repeated it remains vigilant to inflation risks even as it expects disinflation to continue.
In a hint of when rates might come down, the bank said it is increasingly focused on the alignment of inflation expectations and pricing with its own projections for the disinflation path.
The central bank lastraised the policy rate in March, by 500 basis points, capping an aggressive tightening cycle that began more than a year ago to rein in years of soaring prices.
It has since held steady while vowing to hike rates more if the outlook worsens, though analysts generally expect cuts to begin later this year.
The "alignment of inflation expectations and pricing behaviour with projections has gained relative importance for the disinflation process," the policy committee said.
"Indicators for the third quarter suggest that domestic demand continues to slow down with a diminishing inflationary impact," it added.
The lira strengthened to 33.82 after the decision. It touched a record low of 33.84 earlier on Tuesday.
Annual inflation began dipping in June and touched 61.78% last month in what is expected to be a gradual, lasting decline. Economists predict it will reach about 42% by year end.
Since June last year, the central bank has raised its policy rate by a total 4,150 basis points, reversing years of monetary stimulus supported by President Tayyip Erdogan to boost economic growth despite soaring prices.
The policy U-turn is clamping down hard on credit and economic growth, and aims to leave behind a years-long cost-of-living crisis and series of currency crashes.
