UPDATE - Turkish Central Bank keeps interest rates steady

UPDATES WITH COMMENTS FROM CENTRAL BANK AND BACKGROUND INFORMATION

By Muhammed Ali Gurtas

ANKARA (AA) - The Turkish Central Bank on Tuesday announced it is keeping its one-week repo rate -- also known as the bank's policy rate -- constant at 17.75 percent.

The decision came in a statement from the bank's Monetary Policy Committee meeting.

Tuesday saw the bank's sixth meeting of this year. According to the bank's schedule, the next three meetings are to be held on Sept. 13, Oct. 25, and Dec. 13.

At its fifth meeting on June 7, the bank raised the policy rate by 1.25 percentage points from 16.50 percent.

Following the bank's decision, the U.S. dollar/Turkish lira rate jumped to over 4.90 from 4.7520 at market opening as of 9.30 a.m. local time (0630GMT).

One dollar was traded for 3.78 liras at the beginning of this year, while last year the average USD/TRY rate was 3.65.

"Cost factors and volatility in food prices have been the main drivers of the recent upsurge in inflation," the bank said. "On the other hand, price increases have shown a generalized pattern across sub-sectors."

"Despite the milder impact of demand conditions on inflation, elevated levels of inflation and inflation expectations continue to pose risks to pricing behavior," it said, adding:

"Accordingly, the Committee assessed that it might be necessary to maintain a tight monetary stance for an extended period."

In June, consumer prices in Turkey rose 15.39 percent year-on-year, while the annual inflation rate was 12.15 percent in May and 10.85 percent in April.

The bank said all available instruments will be used to achieve price stability targets, adding: "Tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement."

"Inflation expectations, pricing behavior, the lagging impact of recent monetary policy decisions, contributions of fiscal policy to rebalancing process, and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered," the bank added.