The Monetary Policy Committee, chaired by Central Bank Governor Şahap Kavcıoğlu, released a statement after its meeting.

The Committee said that, despite the constraining effect of the pandemic, domestic economic activity is strong, led by domestic and external demand, adding: “Manufacturing industry activity exhibits a strong momentum, whereas the weak course continues in the services sector, which has been adversely affected by the pandemic restrictions.”

“Nevertheless, risks for economic activity exist in either direction depending on the progress of the pandemic and the vaccination process. Notwithstanding the rise in exports and the fall in gold imports, strong domestic demand and commodity prices continue to adversely affect the current account balance. While commercial loans exhibit a moderate course, an upward trend is observed in consumer loan growth despite tightening financial conditions.”

The Committee underlined that demand and cost factors, supply constraints in some sectors, and high levels of inflation expectations continue to pose risks to the pricing behavior and inflation outlook.

“The decelerating impact of the current monetary stance on credit and domestic demand is envisaged to become more significant in the upcoming period. Accordingly, the MPC has decided to maintain the tight monetary policy stance by keeping the policy rate unchanged,” the Committee said.

“The CBRT will continue to use decisively all available instruments in pursuit of the primary objective of price stability. The policy rate will continue to be determined at a level above inflation to maintain a strong disinflationary effect until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is reached.”

“The stability in the general price level will foster macroeconomic stability and financial stability positively through the fall in country risk premium, reversal in currency substitution, accumulation of foreign exchange reserves and perpetual decline in financing costs. This would create a viable foundation for investment, production and employment to continue growing in a healthy and sustainable way,” it concluded.