Turk­ish cen­tral bank keeps rates on hold

Kuwait Times - - BUSINESS -

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

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