Turkey’s central bank kept its three main interest rates unchanged, citing delayed improvement in inflation caused by high food prices.
The monetary policy committee in Ankara today decided to keep the benchmark one-week repo rate at 8.25 percent, in line with all 15 economists’ forecasts in a Bloomberg survey, while leaving the overnight lending and borrowing rates at 11.25 percent and 7.5 percent, respectively. Inflation in August was 9.54 percent, almost double the central bank’s year-end target.
“Elevated food prices continue to delay the improvement in inflation look,” the bank said in a statement accompanying the decision today. “Inflation expectations, pricing behavior and other factors that affect inflation will be closely monitored and the tight monetary stance will be maintained.”
The decision comes as the lira has declined 3.8 percent this month against the dollar, the worst performance among 10 major emerging market currencies in Europe, the Middle East and Africa excluding South Africa’s rand. The currency weakened 0.5 percent to 2.2467 at 2:10 p.m. today in Istanbul, while two-year bond yields rose three basis points to 9.35 percent.
“The decision to keep all rates unchanged should be lira supportive,” Dilan Anli, an analyst at Maxis Investments in London, said by e-mail today. “This move could also ease the erosion in the central bank’s credibility because of the speculation about political pressure and failure to meet its inflation target.”
via Bloomberg
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Alfonso Esparza