Turkey's Central Bank leaves key interest rates on hold

ANKARA

Turkey’s Central Bank decided to leave its key interest rates unchanged during its meeting Tuesday, the bank announced.

The bank left its benchmark interest rate or one-week repo rate at 7.50 percent as forecast by markets and economists.

Also, the upper and lower limits of interest rate corridor, which the bank utilizes for borrowing and lending money to commercial banks, remained unchanged.

The upper limit of the interest rate was left at 10.75 percent, while the lower limit was at 7.25 percent.

Inflation outlook of Turkish economy continued to be the decisive factor in monetary policies, according to the report in which the Central Bank once again repeated: “Future monetary policy decisions will be conditional on the inflation outlook”.

The bank said low energy prices continue to affect Turkish economy positively but other factors such as uncertainty in global markets and volatility in energy and unprocessed food prices limited improvement in core indicators.

Enver Erkan, economist at ALB Securities, said: “When we take a look at the policy statement, it’s seen that the only changed part is about the exports to EU countries.

“Also, global volatility concerns are missing in the policy statement.”

Erkan expected the bank to adopt more dovish policies in the near future as long as the Turkish lira managed to preserve itself from aggressive depreciation.

A more dovish governor may also pave way to an easier monetary stance; tenure of incumbent Governor Erdem Basci is set to end by April this year.

“We see that there would be considerable change on monetary policy stance and interest rates, as long as Turkish lira stays far below its historical top level and because of the management change in April,” Erkan said.