Turkey unexpectedly keeps rate steady for first time since March
Turkey´s central bank kept its interest rate steady for the first time since March, wiping out the day´s lira losses and defying analysts´ expectations of cut.
The central bank said in a statement on its website that the overnight lending rate would remain at 8.25 percent. Surveys of economists by Bloomberg and others had forecast a likely snip of 25 basis points.
Shortly after the release, the lira was 0.2 per cent higher against the US dollar, a jump from the day´s losses which at one point saw a decline of 0.4 percent.
The bank said the one-week repurchasing rate remained stable at 7.5 percent as well as the overnight borrowing rate, at 7.25 percent. It is the first time there has been no cut under new governor Murat Cetinkaya, who replaced Erdem Basci in April. Basci had frustrated the government over his refusal to cut rates.
In October, the lira has come under pressure, falling to an all-time record low against the US dollar. It had lost more than four percent in value since the start of the month.
In its statement, the bank appeared to be more cautious on inflation outlook as it referred to the exchange rates and commodity price increases, chief economist Ozgur Altug of BGC Partners in Istanbul said in a note.
In September, inflation fell to 7.28 percent but a weakened lira raises fears of higher prices. Yigit Bulut, an aide to President Recep Tayyip Erdogan, indicated in an interview with the state-run TRT broadcaster that there could be a pause in cutting the rate.
The lira´s losses came amid continued political
uncertainty as the debate over a presidential system -which would give Erdogan more power -- returned to the public sphere after the July 15 failed coup.
Since being elected in August 2014, Erdogan has turned the usually more ceremonial role into something with more executive power, chairing cabinet meetings and holding rallies last year for the ruling party he co-founded.
After surviving the attempted putsch, Erdogan looks likelier than ever to secure at least a referendum on giving him the executive presidency, with the Nationalist Action Party (MHP) seeming to give its support for constitutional changes.