Turkish central bank keeps rates on hold

ISTANBUL: Turkey’s central bank kept interest rates on hold yesterday, in a move unexpected by analysts as the sliding lira currency took a back seat to President Tayyip Erdogan’s push for cheaper credit. The currency has lost 17 percent of its value against the dollar this year, hit by investor concerns about a crackdown by authorities in the aftermath of a failed coup in July and by a resurgent dollar following Donald Trump’s US presidential election win.

Erdogan wants the central bank to reduce borrowing costs to help spur flagging economic growth. He has described himself as an “enemy” of high interest rates and railed at banks for what he views as overcharging for credit. The bank kept its benchmark one-week repo rate unchanged at 8 percent. Thirteen of 18 economists in a Reuters poll had expected a hike in the repo rate.

“Exchange rate movements due to recently heightened global uncertainty and the increase in oil prices pose upside risks on the inflation outlook,” the bank’s monetary policy committee said in a statement. “The aggregate demand developments restrain these effects,” it said.

It said economic activity had shown a partial recovery for the final quarter after a deceleration in the third quarter and the recovery was expected to continue at a moderate pace.

The lira weakened on Monday after the Russian ambassador to Turkey was shot dead as he gave a speech in the capital Ankara but rebounded on Tuesday before the rates decision on relief that Moscow and Ankara struck a unified tone after the attack.

After rates were left on hold, the lira tumbled as far as 3.5440 against the dollar from 3.5095 beforehand. The bank also kept its overnight lending rate at 8.5 percent. Fifteen of the 18 economists also forecast a hike in the lending rate, which is the upper band of the bank’s interest rate corridor. — Reuters