Turkey to keep rate at 14pc despite 80pc inflation

Turkey’s central bank is expected to hold its policy rate unchanged at 14 per cent for an eighth meeting next week, a Reuters poll showed on Friday, in the face of a global tightening cycle and rampant inflation at nearly 80 per cent that shows no signs of falling.

Most economists 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 14 economists who participated in the Reuters poll expected the central bank to maintain its benchmark rate in the policy-setting meeting next week.

Seven of nine economists polled expect the policy rate to remain at the same level by year-end. One expected a cut to 12 per cent by then, while another foresaw a hike to 20 per cent.

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

The bank raised its year-end inflation to 60.4 per cent last month, and saw it peaking near 90 per cent in the autumn. That compares to a year-end forecast median of 70 per cent in the latest Reuters poll and a level of 79.60 per cent announced for July.

Economists say the central bank will not raise rates, with Erdogan having firmed his grasp on the bank after rehauling the bank’s management over the years, including sacking three governors in as many years.