Turkish Central Bank Keeps Key Rate Unchanged For Second Time
April 27 2023 - 6:34AM
RTTF2
Turkey's central bank maintained its key interest rate for the
second straight meeting on Thursday ahead of the presidential
election on May 14.
The Monetary Policy Committee of the Central Bank of the
Republic of Turkey, or CBRT, led by Governor Sahap Kavcioglu, left
the policy rate, which is the one-week repo auction rate, unchanged
at 8.50 percent. The move was in line with expectations.
The previous change in the policy rate was in February, when it
was lowered by 50 basis points. Under the immense pressure from
President Recep Tayyip Erdogan, the central bank had lowered the
rate by cumulative 500 basis points last year.
With the support of the integrated policy approach, underlying
trend of inflation improved, the central bank said. The committee
added that the effect of the earthquake-driven supply-demand
imbalances on inflation is closely monitored.
Policymakers viewed that the current policy stance is adequate
to support the necessary recovery in the aftermath of the
earthquake by maintaining stability.
Earlier this month, official data showed that consumer price
inflation slowed to a 14-month low in March. Still inflation
remained at an elevated level of 50.5 percent.
The bank repeated that it will continue to use all available
tools decisively until there is clear sign of a permanent fall in
inflation and the medium-term inflation target is achieved.
Further, the bank said it will implement Liraization Strategy.
The key challenge for the central bank currently is to maintain
the stability of the exchange rate in the near term, ahead of the
elections, ING economist Muhammet Mercan said. The economist noted
that the extra fiscal burden of reconstruction costs as well as the
central bank's supportive stance will add pressure on the already
elevated headline inflation. The economist expects normalization in
the conduct of monetary policy in the period ahead.
Alongside parliamentary elections, the presidential election is
due on May 14. President Erdogan's call for lower interest rates to
support economic growth has forced foreign investors to flee and
the currency faced sharp devaluation.
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