ISTANBUL: Turkey’s central bank left its benchmark interest rate unchanged on Thursday, as expected, easing investor concerns over an early loosening after inflation eased from a 15-year peak due to a stronger lira and government measures.
The one-week repo rate remained at 24 percent, up 11.25 percentage points since the start of this year to underpin the currency, which at one point lost almost half of its value against US dollar, and counter soaring inflation.
“The committee has decided to maintain the tight monetary policy stance until inflation outlook displays a significant improvement,” the central bank’s monetary policy committee said in a statement.
In previous statements it said it would maintain the tight stance “decisively”, but the word was absent this time.
A lira currency crisis was sparked this year by concerns about the central bank’s independence prompted by pressure from President Tayyip Erdogan to ease borrowing costs, and a diplomatic rift with the United States.
Erdogan, a self-described “enemy” of interest rates, wants to see cheaper credit flowing to companies to boost economic activity, which lost momentum in the third quarter.
Erdogan’s calls for lower rates have battered confidence in the central bank’s ability to adequately rein in double-digit inflation, which hit a 15-year high of more than 25 percent in October, way off the official target of 5 percent.
Annual inflation eased in November on the back of tax cuts, discounted products and a stronger lira. That prompted fears among investors over an early loosening of monetary policy.
All 20 economists polled by Reuters expected the central bank to keep its one-week repo rate steady.
The lira, which has since recovered some losses, is still down nearly 30 percent this year, deepening worries about the wider impact on the economy and banks.
The currency firmed to 5.3050 against the dollar following the decision from 5.3560 directly before. By 1115 GMT it was 5.3350.