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ISTANBUL: Turkiye’s central bank kept its policy rate at 8.5% on Thursday as expected, stressing the importance of supportive financial conditions to preserve economic growth momentum in its last policy meeting before May 14 elections.

In February, the bank cut its key interest rate by 50 basis points to provide stimulus after earthquakes which killed more than 50,000 people in Turkiye and left widespread destruction. Rates were unchanged in March.

“The Committee assessed that the current monetary policy stance is adequate to support the necessary recovery in the aftermath of the earthquake,” the central bank’s policy committee said.

“Leading indicators show that the economic activity in the earthquake zone has been recovering faster than expected.”

Turkey central bank gross reserves seen down $5bn last week -bankers

Even before the quakes, analysts had said easing was possible before the presidential and parliamentary elections, in which President Tayyip Erdogan faces the biggest political challenge of his two-decade rule.

The lira was unchanged at 19.4280 against the dollar after the central bank statement.

Last year the bank cut its key rate by 500 basis points in an unorthodox easing cycle designed to counter an economic slowdown, before keeping it steady at 9% in December and January. The stimulus came even as inflation soared above 85% last year and dipped only to 50.5% in March.

A self-described “enemy” of interest rates, Erdogan has urged monetary stimulus over the last several years to boost growth and exports, though it set off a series of lira crises and stoked prices.

Turkiye central bank takes fresh measures to support de-dollarisation

Some anticipate a return to orthodox policies after the elections, with the policy rate seen rising to 24% in the third quarter, according to the median estimate in a Reuters poll.

Erdogan said last week that rates would keep falling as long as he is in power. He said inflation would fall with them, reiterating his unorthodox views.

Inflation was seen remaining elevated through the year despite the hikes and falling only to 46.4% at end-2023, the Reuters poll found.

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