The Central Bank of the Republic of Turkey (CBRT) held all key rates following monetary policy meeting on Tuesday. It has left its benchmark one-week repo and overnight borrowing rates at 7.5 percent and 7.25 percent, respectively. The bank has also kept the marginal funding rate steady at 10.25 percent.

The monetary policy committee of the CBRT held its June meeting on Tuesday. The committee later released a press statement which said, inflation is expected to decline in the short term owing to a partial correction in food prices. "Yet, recent movements in the exchange rates have delayed the improvement in the core indicators," it said.

The bank said that inflation is expected to decline in the short term with the contribution of a partial correction in food prices. However, the movements in the exchange rates and the uncertainty in global markets combined with volatility in energy and food prices have been the reasons for the CBRT to keep interest rates at current levels. The banks said that these reasons make it necessary to maintain the cautious stance in monetary policy.

The CBRT will continue to follow inflation and, according to the statement, future monetary policy decisions will be conditional on the improvements in the inflation outlook. Inflation expectations, pricing behavior and other factors that affect inflation will be monitored closely by the bank and a cautious monetary policy stance will be maintained by keeping a flat yield curve until there is a significant improvement in the inflation outlook.

Loan growth is continuing at reasonable levels in response to tight monetary policy stance and macroprudential measures, said the bank. "The favorable developments in terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance. External demand remains weak, while domestic demand contributes to growth moderately. The committee has assessed that the implementation of the announced structural reforms will contribute to the potential growth significantly," the statement read.