Turkey’s central bank is increasingly likely to cut its benchmark interest rate of 19 percent too early due to political pressure, French bank Societe Generale said on Monday, Reuters reported. The central bank will probably keep interest rates unchanged this year, but risks of any early reduction have increased, analyst Phoenix Kalen said. She said clients should prepare for the lira to weaken to 8.85 per dollar by the year-end due to the uncertainty. “As the market scrutinises the (bank’s) credibility over the coming weeks, volatility is likely to rise,” Kalen said. The lira has come under renewed selling pressure after central bank governor Şahap Kavcıoğlu said last week that he would use core inflation as a main guide for setting interest rates. The new focus on the core number of 16.76 percent potentially gives the central bank room to cut rates, a move called for b
y President Recep Tayyip Erdoğan. Kavcıoğlu spoke on Wednesday, after the statistics agency reported consumer price inflation accelerating to 19.25 percent in August. The lira was trading down 0.2 percent at 8.43 per dollar on Tuesday morning local time. It traded as strong as 8.26 per dollar early last week before weakening to as low as 8.51 per dollar after Kavcıoğlu spoke. The central bank’s rate-setting committee is due to meet on interest rates on Sept. 23.