ISTANBUL: The Turkish lira lost almost one percent against the dollar on Tuesday and stocks weakened after the central bank keept rates on hold, shocking investors and raising concerns that monetary policy is being swayed by government pressure.
Analysts and investors have repeatedly called for a rate hike to rein in inflation and put a floor under the lira , which has been hit by violence in Turkey's mainly Kurdish southeast and by a rumbling dispute with Russia over a downed warplane.
However, the bank (CBRT) held fire for the 10th straight month, even though annual inflation rose to 8.1 percent in November, well above an official 5 percent target.
"We remain of the view that the MPC will tighten monetary conditions over the coming months as inflation rises higher," said William Jackson, senior emerging markets economist at Capital Economics, referring to the bank's monetary policy committee.
"If the (bank) delays further, this is merely likely to lead to a loss of the CBRT's credibility in the markets, an even weaker lira and, possibly, tighter monetary policy than would otherwise be the case," Jackson added.
President Tayyip Erdogan has repeatedly called for lower interest rates to boost economic growth, fuelling fears of political interference in central bank policy.
The lira traded at 2.9371 against the dollar at 1537 GMT, almost 1 percent down from 2.9106 late on Monday.
The main BIST 100 share index edged down 0.29 percent to 73,102.10 points, having risen 1.2 percent on Monday.
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