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Turkey's central bank seen keeping policy rate unchanged

  • Turkey's annual inflation rate climbed more than expected to some 15% last month and central bank governor Agbal said a possible interest rate cut will not be on agenda for a long time this year.
18 Feb 2021

ISTANBUL: Turkey's central bank is expected to keep its policy rate unchanged at 17% at its meeting next week, a Reuters poll showed on Friday, even as inflation remained above expectations.

The median estimate in a Reuters poll of 21 economists was for the central bank to keep its one-week repo rate at 17%. One economist expected a hike to 17.75%, while four others expected a hike to 18%.

Under the newly appointed Governor Naci Agbal, the central bank has hiked its benchmark rate by 675 basis points since November, in an effort to tame inflation that surged in the last two months of the year. The central bank kept its policy rate on hold in January.

Turkey's lira declined some 20% last year, pushing inflation higher through imports denominated in hard currencies. It has also led individuals to snatch up forex and gold against double-digit inflation and a volatile currency.

The lira has rebounded over the past two months, on hopes that new economy team and central bank governor would follow more orthodox policies.

Turkey's annual inflation rate climbed more than expected to some 15% last month and central bank governor Agbal said a possible interest rate cut will not be on agenda for a long time this year.

The median estimate of 18 economists for the policy rate at year-end stood at 14%, with estimates ranging between 17% and 12%. Eleven of the economists surveyed on the timing of the first rate cut pointed to the third quarter while four of them said the policy easing could come in the final quarter. One respondent said an initial rate cut could come in Q2.

The central bank is scheduled to announce its policy rate decision at 1100 GMT on Feb. 18.