Turkish bank seen holding rates steady

Turkey’s central bank is likely to keep its main interest rate on hold at 24% this week, a Reuters poll showed on Monday, following a bigger-than-expected decline in November inflation.

All 20 economists polled by Reuters expect the CBRT central bank to keep its one-week repo rate steady at tomorrow’s policy-setting meeting.

Inflation last month eased to 21.6% after hitting a 15-year peak of more than 25% in October.

That was a bigger decline than the market had expected and is widely seen as giving the central bank some breathing room.

The bank has been reluctant to hike interest rates, investors say.

It would be a monumental mistake to ease policy,” said Per Hammarlund, chief economist for emerging markets at SEB. “Investor confidence is hanging by a thread, and a premature easing would further undermine the credibility of the CBRT.”

Concerns about the central bank’s independence and a diplomatic rift with the US sparked a currency crisis this year, sending the lira down more than 40% against the dollar at one point and deepening concern about the wider impact on the economy and banks.

The currency has since recouped some losses, although it is still down nearly 30% this year.

The relative strengthening in the lira, as well as lower oil prices and government-driven discounts on consumer products, have helped to slow inflation’s rise.

The headquarters of Turkey’s central bank is seen in Ankara (file). All 20 economists polled by Reuters expect the bank to keep its one-week repo rate steady at tomorrow’s policy setting meeting.