Turkish Central Bank keeps rates on hold as election looms
ISTANBUL - ReutersTurkey’s Central Bank left interest rates unchanged on Oct. 21, shying away from a hike ahead of a Nov. 1 election and waiting to take its cue from an expected tightening by the U.S. Federal Reserve (Fed).
Economists expect Turkey to raise rates at some point to bolster the weak lira and fight high inflation. But the Central Bank has signaled it wants to wait to see the impact of an expected Fed move before adjusting its own policy.
The bank left its main one-week repo rate unchanged at 7.5 percent for the eighth month in a row, as expected by all 15 economists in a Reuters poll.
It said it would maintain tight monetary policy in line with inflation expectations and that exchange rate movements were delaying an improvement in core indicators.
“Taking into account inflation expectations, pricing behavior and the course of other factors affecting inflation, the tight monetary policy stance will be maintained,” the bank said in a statement following its monetary policy meeting.
In previous statements it had referred to maintaining a “cautious” policy until there was a “significant improvement in the inflation outlook.”
Doubts over the outcome of next month’s parliamentary election - the fourth national vote in less than two years - have taken a toll on the economy, with foreign investors staying on the sidelines and growth slowing.
Once the Fed does raise rates, emerging markets such as Turkey are expected to follow suit to defend their currencies against a surging dollar.
Inflation remains stubbornly high, with the year-end headline figure seen at 8.25 percent, according to the Central Bank’s latest survey. Consumer confidence has meanwhile slumped and the government this month cut its growth forecasts for the next three years.
The bank kept the overnight borrowing rate at 7.25 percent, the overnight lending rate at 10.75 percent and the primary dealers’ overnight borrowing rate at 10.25 percent.