POLL-Turkish cenbank to keep rates unchanged at 14% despite inflation at 73.5%


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reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?RIC=TRINT%3DECI poll data

Policy rate seen unchanged until year-end

Inflation seen rising further in coming months

Erdogan has said more rate cuts to come

ISTANBUL, June 17 (Reuters)Turkey’s central bank is expected to hold its policy rate unchanged at 14% for a sixth meeting next week, a Reuters poll showed on Friday, in the face of a global tightening cyle and rampant inflation at 73.5% that shows no signs of slowing down.

Most economists polled expect the key interest rate to remain steady through year-end, reflecting no apparent U-turn in President Tayyip Erdogan’s unorthodox economic policy plan.

The central bank paused an easing cycle in January after its cuts totalling 500 basis points last year sparked a currency crisis, sending inflation to 24-year highs, stoked in part by surging energy prices due to Russia’s invasion of Ukraine.

All but one of 15 economists expect the central bank to maintain its benchmark rate in the policy-setting meeting next week. One expected a cut to 13%.

All nine economists polled expect the policy rate to remain at the same level by year-end.

The central bank held rates steady at 14% at the last five meetings, leaving real rates deeply negative even as a global tightening cycle puts more pressure on the lira.

Several economists cited the unpredictability of the central bank given influence from Erdogan and have declined to participate in polls in recent months.

Erdogan said last week that his government will not increase rates but continue to lower them.

Under the current economic programme, the government wants the private sector to make investments by taking advantage of low rates to increase production, exports and employment.

Fuelled by the war in Ukraine, rising energy prices and a tumbling lira, the annual price inflation rose to 73.5% in May. It is expected to rise further in coming months, eating deeply into the earnings of households facing soaring living costs.

The currency crisis sparked by the central bank’s easing cycle saw the lira lose 44% against the dollar last year, which stoked inflation via imports priced in hard currencies.

The lira lost nearly 24% against the greenback this year due to global financial developments and domestic economic policies.

The central bank will announce this month’s rate decision at 1100 GMT on June 23.

(Reporting by Ali Kucukgocmen Editing by Ece Toksabay)

(([email protected] , @alikucukgocmen; +905319306206; Reuters Messaging: Reuters Messaging: [email protected]))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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