Turkey holds in­ter­est rates as ex­pected on in­fla­tion wor­ries

The Daily Star (Lebanon) - - BUSINESS -

Turkey’s cen­tral bank kept its main in­ter­est rates un­changed as ex­pected Thurs­day, cit­ing the level of in­fla­tion as a rea­son for cau­tion.

The one-week repo, overnight lending and late liq­uid­ity win­dow rates re­mained at 8 per­cent, 9.25 per­cent and 12.25 per­cent re­spec­tively, while the overnight bor­row­ing rate was main­tained at 7.25 per­cent. All econ­o­mists sur­veyed by Bloomberg fore­cast a hold.

Gov. Mu­rat Cetinkaya is stick­ing to his pledge to keep the cost of lending el­e­vated un­til there’s a marked im­prove­ment in in­fla­tion – some­thing the cen­tral bank doesn’t ex­pect un­til the end of the year. Price gains ac­cel­er­ated to dou­ble dig­its last month, which the bank said showed that the past de­pre­ci­a­tion of the lira is still feed­ing into con­sumer prices.

The cur­rency has re­cov­ered more than 10 per­cent from a record low in Jan­uary, after the reg­u­la­tor raised the cost of bor­row­ing to the high­est level in at least six years.

“The cen­tral bank is likely to be pa­tient be­fore se­ri­ously con­sid­er­ing a rate cut,” given that in­fla­tion may re­main volatile in the com­ing months, Piotr Matys, a strate­gist at Rabobank in London, said in an email after the de­ci­sion. He ex­pects price gains to ease next year.

The lira was up 0.2 per­cent at 3.4509 per dol­lar at 5:36 p.m. in Is­tan­bul. The yield on Turkey’s twoyear lira notes was un­changed at 11.62 per­cent, ac­cord­ing to data com­piled by Bloomberg.

The cen­tral bank, in its state­ment, re­peated its prom­ise to tighten pol­icy if needed, but it omit­ted a pre­vi­ous ref­er­ence to an ex­pected slow­down in food in­fla­tion and man­u­fac­tur­ing costs. In­stead, the bank high­lighted the “risks on pric­ing be­hav­ior” stem­ming from the Au­gust rise in core in­fla­tion, which strips out the im­pact of volatile items such as food and en­ergy.

Core in­fla­tion surged to 10.2 per­cent last month, the high­est since June 2005 and sig­nif­i­cantly more than the 9.8 per­cent pre­dic­tion in a Bloomberg sur­vey of econ­o­mists. Though the bank doesn’t have a tar­get for core in­fla­tion, it is widely seen as an in­di­ca­tor of un­der­ly­ing price pres­sure and there­fore com­pares un­fa­vor­ably with the reg­u­la­tor’s long-term goal of 5 per­cent head­line in­fla­tion.

Newspapers in English

Newspapers from Lebanon

© PressReader. All rights reserved.