Turkish lira edges up ahead of key central bank meeting

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Turkey’s lira rose against the dollar as central bank governor Şahap Kavcıoğlu prepared to announce the institution’s quarterly inflation report.

The lira was trading up 0.2 percent at 8.17 per dollar at 10:32 a.m. in Istanbul local time.

Kavcıoğlu is holding his first public meeting and Q&A with journalists and investors to outline inflation policy since President Recep Tayyip Erdoğan appointed him in mid-March.

The central bank’s target for year-end inflation stands at 9.4 percent, but annual price increases accelerated to 16.2 percent in March and are expected to nudge higher in April and May. Kavcıoğlu will probably raise the bank’s inflation target to 11.5-13 percent, according to economists including Hakan Kara, an academician and former chief economist at the central bank.

Investors will also be looking for signals from Kavcıoğlu concerning the direction of interest rates. Monetary policymakers left the benchmark rate unchanged at 19 percent at a meeting this month despite inflationary pressures.

Kavcıoğlu has sympathised with Erdoğan’s insistence that high interest rates cause inflation, a view that jars with conventional economic theory. He said last week that high rates were bad for industry. That has raised concern among investors that the bank will lower borrowing costs before inflation pressures have fully eased.

Ahval

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