Turkey’s central bank left its benchmark interest rate unchanged on Wednesday as accelerating inflation and the weakening of the lira leave little room for lower loan costs than President Recep Tayyip Erdogan. has searched.
Turkey’s central bank on Wednesday maintained its benchmark interest rate for a quarter month as rising prices and the weakening of the lira affected the economy’s recovery after the pandemic blockades.
The Monetary Policy Committee maintained the one-week replenishment rate at 19%, as predicted by the 21 analysts surveyed by Bloomberg. Turkish inflation accelerated faster than all forecasts in June due to rising world commodity prices and easing coronavirus restrictions, leaving little room for borrowing costs to decline. President Recep Tayyip Erdogan has sought for July or August.
The central bank said it will maintain its current monetary position until a significant drop in price growth and warned of the “possible volatility” of inflation over the summer as the economy reopens.
“The current account is expected to produce a surplus the rest of the year due to the strong upward trend in exports and the strong progress in the vaccination program that stimulates tourism activities,” the bank said in a statement which accompanied his type decision.
With inflation risks projected to extend into July, a separate survey of 14 analysts showed that most were only expecting a rate cut in the last three months of 2021. Four said the central bank would begin to relax monetaryly. in the third quarter.
Morgan Stanley analysts, including Alina Slyusarchuk, predicted a 100 basis point reduction in September, “when tourism-related inflows provide some support to the foreign exchange market.” But if inflationary pressures remain high, there could be a smaller 50 basis point reduction or a reduction could be postponed until the fourth quarter, he said in an email note ahead of the banking decision.
The lira has weakened more than 15% against the dollar since bank governor Sahap Kavcioglu took office in March, although he has pledged to maintain a positive rate when it adjusts to realized and expected inflation. and to maintain a tight policy until the bank’s 5% inflation target is reached. The currency changed shortly after the decision. It was trading 0.3% stronger at 8.5993 per dollar at 15:07 local time.
Istanbul economist Haluk Burumcekci expects the monetary authority to increase its year-end price growth forecast by 2 percentage points at the next meeting of the inflation report. “The central bank has no room for maneuver and the only weapon left is to postpone rate cut expectations,” he said.
A survey of central banks in July showed that market participants expected global inflation to end the year at 15.6%, above its own forecast of 12.2%. The monetary authority will update its own base scenario for prices until the rest of 2021 and the following two years, on 29 July.
(Updates with lyre reaction in the seventh paragraph, analysts quote in the eighth).