The statement was almost unchanged from June. The only minor tweak isthe MPC's marginal recalibration in growth assessment, which now reads as'...economic activity is expected to maintain its strength' versus '…activity isexpected to accelerate further' mentioned a month ago. Notwithstanding thefledgling deceleration, the Bank still finds current elevated levels of inflationunpalatable for healthy formation of pricing behaviour, hence maintenance oftight policy stance for now, in a la Turca terms.
Forward-looking bits of the statement are also kept unchanged. The Bank stillcommits to maintain a tight policy stance until the inflation outlook displayssignificant improvement. Like in June, the MPC keeps the door open for furthertightening, if need be. The next rate decision will be on September 14.
The July meeting was also new MPC member Omer Duman's inaugural one.
Recall that, Mr Duman had been elected to the Board in April and appointed asmember of MPC from the Bank Board quota, replacing Ahmet Faruk Aysan.
Given that growth dynamics appear strong in the forthcoming period, CBT couldafford focusing on efforts to re-anchor inflation expectations. The idea is probablyto keep TRY stable (yet not stronger) to induce further decline in financial stabilityrisks while at the same time supporting disinflation process (mostly in 2018) viaa consistent weakening in FX pass-through impact.
Needless to say, the prime underlying condition for this strategy to work - withoutany re-calibration in CBT's policy stance - is maintenance of current supportiveconditions in global backdrop in H2 and beyond. If the latter prerequisite wobbles ,then CBT's prevailing pose could be seen as inadequate by markets to fend offrisks on TRY (and subsequently on inflation), particularly when combined withcurrent loose fiscal conditions.