Turkish central bank to continue to hold key policy rate at 14%

Türkiye’s central bank is expected to hold its key policy rate unchanged for an eighth meeting next week, according to polls, in the face of soaring inflation that runs at a 24-year high.

The Central Bank of the Republic of Türkiye (CBRT) held the one-week repo rate at 14% at the last seven meetings and has been reiterating its expectation that the disinflation trend was expected to begin.

Most economists expect the benchmark policy rate to remain steady through year-end, according to a Reuters survey.

The key policy rate has been steady since January when the CBRT paused an easing cycle after its cuts totaling 500 basis points since September last year.

All 14 economists who participated in the Reuters poll, unveiled Friday, expected the 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% by then, while another foresaw a hike to 20%.

Türkiye’s annual inflation rose at a slower-than-expected pace in July but still reached a fresh 24-year high of nearly 80%, stoked in part by surging energy prices due to Russia’s invasion of Ukraine.

The CBRT raised its year-end inflation forecast to 60.4% last month, and saw it peaking near 90% in the autumn.

President Recep Tayyip Erdoğan in June vowed that his government would continue lowering interest rates rather than increasing them.

Erdoğan is known for his opposition to higher borrowing costs, which he says only makes “the rich richer and the poor poorer.”

The government has been affirming its commitment to boosting production, exports and employment with a low-rates policy, and has promised a current account surplus that is said to eventually steady the Turkish lira and cool inflation.

The lira lost 44% of its value against the dollar last year. It depreciated another 27% this year.

The central bank will announce this month’s rate decision on Aug. 18.

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