Turkey's central bank leaves key rates unchanged
Turkey's central bank kept its three main interest rates unchanged on Tuesday and said policy makers would keep liquidity tight, with food prices and tax increases fueling above-target inflation. The bank kept its main one-week repo rate at 7.50 percent, matching the median estimate in a survey of 19 economists. It also kept its overnight lending and borrowing rates at 10.75 percent and 7.25 percent respectively, according to a statement posted on the bank's website.
The bank again made no reference to Governor Erdem Basci's plan to abandon Turkey's triple-rate framework and move to a single-rate monetary policy, focusing instead on the outlook for inflation. With price increases running at almost double the bank's 5 percent target and his mandate expiring on April 19, Basci probably wants to leave key decisions to his successor, said Ipek Ozkardeskaya, a markets analyst at London Capital Group Ltd.
"The make up of the bank's monetary policy committee led by Basci is going to change this year which makes it more appropriate for the new team to come up with new plan," Ozkardeskaya, who accurately predicted the bank's decision to hold rates, said by e-mail on Monday. "If simplification happens, it should be done by the new team for sake of continuity." Basci said last year he planned to simplify monetary policy once the U.S. Federal Reserve began raising interest rates. After that happened in December, Basci said he would wait to see if lower volatility in debt markets persisted, and then made no reference to the plan in last month's rates decision.