ANKARA
The Central Bank of the Republic of Turkey announced in a statement on Wednesday that key interest rates will remain at current levels.
The marginal funding rate used for overnight borrowing by banks will remain at 10.75 percent.
The one-week repo rate, used for short-term funding by banks, will be held at 7.5 percent.
And the basic borrowing rate will stay at 7.25 percent.
The Turkish lira remained close to its current level at about 2.60 to the dollar after the announcement.
"The ongoing cautious monetary policy, along with prudent fiscal and macro prudential policies continue to have a favorable impact on inflation, especially inflation excluding energy and food," the bank said.
"However, recently elevated volatility in the exchange rates has limited the improvement in the core inflation. This, combined with the uncertainty in global markets and volatility in energy and food prices, makes it necessary to maintain the cautious stance in monetary policy. Accordingly, the committee has decided to keep the interest rates at current levels."
Future interest rate decisions would be closely tied to the inflation outlook, the statement added and changes should not be expected until there is "significant improvement in the inflation outlook".
Commenting on the freeze, Vedat Mizrahi, head of Research at UNLU Menkul Degerler in Istanbul, said: "The bank's decision is mainly due to higher than expected inflation so far this year. Both the [bank's] inflation expectations and also those of the market participants have been elevated in the past couple of months due to higher than expected inflation. Reducing policy rates further would result in further Turkish lira devaluation."
The government has been repeatedly critical of the bank's tight monetary policy, claiming that high interest rates are limiting growth.
