Turkish Central Bank Leaves Rates Unchanged at 7.5%

Turkey’s central bank left interest rates unchanged on Tuesday, after the US Fed held fire citing concerns over emerging economies and before a November election that has made investors increasingly cautious about Turkish assets.

All 16 economists in a Reuters poll had expected the bank to leave its benchmark one-week repo rate unchanged at 7.5 per cent for the seventh month running.

Still, analysts say the bank will have to relent and hike rates to put a floor under the currency and stop its slide from feeding inflation.

The lira has lost nearly a quarter of its value against the dollar this year, making it one of the worst performers among emerging markets. Earlier this month it touched an all-time low of 3.0699 per dollar.  Part of the problem is that investors are wary ahead of a November 1 election re-run where the ruling AK Party is hoping to regain the single-party majority it lost at the polls in June.

The central bank has also faced pressure from President Tayyip Erdogan and some in the government to keep rates on hold, raising concerns over its independence.

“Considering the impact of the uncertainty in domestic and global markets on inflation expectations and taking into account the volatility in energy and food prices, the Committee decided to maintain the tight liquidity stance as long as deemed necessary,” it said in a statement.

The bank kept the overnight borrowing rate at 7.25 per cent, the overnight lending rate at 10.75 per cent and the primary dealers’ overnight borrowing rate at 10.25 per cent.

Via gulftoday.ae

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza