Turkey’s Central Bank has pledged to maintain tight monetary policy to meet inflation targets, warning that, despite predicted continuation of recent disinflation, the risk of inflation is far more serious. Despite monetary control, the banking sector remains dynamic. External demand and the growth of housing and consumer spending loans have partly offset a cooling of domestic demand, and several banks have recently cut rates, giving incentive to borrow further. The implementation of a new mortgage law is expected further to boost demand for credit, albeit in the medium- to long-term. At the end of May, the monetary policy committee of Turkey’s Central Bank announced that short-term interest rates would not be cut, despite the trend of disinflation. The committee said that high levels of consumer spending and investment, high oil prices, an uncertain political environment and service price inflation all combined to make a cut in rates unwise. The bank
