Turkey central bank holds rates steady after inflation upswing

Turkey’s central bank left interest rates unchanged on Thursday after inflation rose, keeping monetary policy tight in the face of a drive for cheap credit by President Tayyip Erdogan.

The bank is tasked with balancing inflationary pressures with Erdogan’s calls for lower rates. Erdogan, who wants banks to lend more at lower rates to stimulate the economy, has described himself as an “enemy” of interest rates.

But for the third straight meeting, the bank kept its late liquidity window, the highest of the multiple instruments it uses to set policy, at 12.25 percent and its benchmark repo rate at 8 percent. All 17 economists polled by Reuters had forecast it would leave the rates unchanged.

“Current elevated levels of inflation and developments in core inflation indicators pose risks on the pricing behaviour,” the bank said in a statement following its policy-setting meeting.

“The central bank will continue to use all available instruments in pursuit of the price stability objective.”

Annual inflation rose more than expected, to 10.68 percent, last month, fuelled by rising transport costs and the prices of core goods and services. Inflation has now been in double digits for six out of eight months this year and remains one of Turkey’s most pressing economic problems.

Finance Minister Naci Agbal said on Thursday it was the government’s duty to take measures that would bring down interest rates, and that rates would fall in tandem with a decline in inflation. (RTRS)