Turkey un­ex­pect­edly keeps rate steady for first time since March

Enterprise - - International news -

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.

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