Turkey’s central bank will keep interest rates steady this week in the first meeting of its Monetary Policy Committee since President Recep Tayyip Erdoğan sacked and replaced its governor.
The bank will keep its benchmark rate unchanged at 19 percent, according to 17 of 19 economists surveyed by Reuters. One predicted a 50-basis points reduction to 18.5 percent, while another said rates would decline to 17 percent, Reuters said on Monday.
New central bank governor Şahap Kavcıoğlu has said a cut to interest rates at Thursday’s meeting is not a certainty, pledging to keep monetary policy tight to achieve inflation goals. But his appointment by Erdoğan has raised expectation for looser monetary policy – Kavcıoğlu had sympathised with Erdoğan’s opposition to high interest rates prior to his arrival.
Three of 13 economists expected a hike in interest rates in the remainder of the year, Reuters said.
Any surprise cut to interest rates on Thursday could lead to a decline in the lira’s value of between 10 percent and 15 percent, meaning the currency would drop to around 9.5-10 per dollar, Morgan Stanley said, according to Reuters.
The lira has lost more than 10 percent of its value since the mid-March dismissal of governor Naci Ağbal, who had raised rates from 10.25 percent during his four-month tenure. It traded down 0.4 percent at 8.17 per dollar on Tuesday.
Consumer price inflation in Turkey accelerated to 16.2 percent in March from 15.6 percent in February, straying from the central bank’s year-end goal of 9.4 percent.
Expectations for inflation by the end of the year have worsened to 13.1 percent from 11.6 percent, according to a monthly central bank survey of finance industry professionals and business leaders published on Friday.
Ahval