Turkish Central Bank leaves all key interest rates unchanged

ANKARA- The Turkish Central Bank left all key interest rates unchanged.

The one-week repo rate stayed at 7.50 percent, and the overnight lending rate at 10.75 percent, the bank said in a statement after a meeting of its monetary policy committee. “The ongoing cautious monetary policy along with prudent fiscal and macro prudential policies are having a favorable impact on inflation, especially inflation excluding energy and food (core inflation indicators- excluding energy and food products). Yet, uncertainty in global markets and elevated food prices necessitates maintaining the cautious stance in monetary policy. Accordingly, the Committee decided to keep the interest rates at current levels,” the statement said. “Future monetary policy decisions will be conditional on the improvements in the inflation outlook,” the bank added. Ozden Onturk, a research expert at Atig investment said, the market did not expect any change in the interest rate due to inflation’s outlook and pressure on the bank. “The bank already cut interest rate in recent months and that limits any further move,” Onturk said. The Turkish lira held at about 2.61 to the dollar after the announcement. Interest rates have been a topic of heated controversy between the government and the central bank since early this year, when the then-Prime Minister Recep Tayyip Erdogan, who is now president, criticized the bank for keeping interest rates high. The rates were limiting economic growth, Erdogan has since said on a number of occasions. President Erdogan, however, met with Central Bank Governor Erdem Basci on March 11, and expressed “sensitivity” to interest rate issues. Consumer price inflation in Turkey rose less than analysts had forecast in February, according to the Turkish Statistical Institute. The Turkish Consumer Price Index rose 0.71 percent from 1.10 percent in the preceding month. The annual rate of inflation was 7.55 percent. The government has formulated a Medium Term Economic Plan, which forecasts inflation reaching 6.3 percent by the end of the year. Analysts feel that goal is achievable, and that further cuts in interest rates may be expected in the near term. “With inflation improving this month, combined with an upbeat global risk appetite, we expect the central bank to continue cutting rates and narrowing the ‘corridor,’ or the band between the rates, next month and onwards,” Ziraat Securities economist Bora Tamer Yilmaz told.