Turkey's Central Bank Leaves Rates Unchanged

(RTTNews) - Turkey's central bank decided to leave its key rates unchanged after raising the one-week repo rate aggressively by 550 basis points last month to curb the sharp fall in the currency.

The Central Bank of the Republic of Turkey today retained its one-week repo rate at 10 percent. The overnight lending rate was maintained at 12 percent and the overnight borrowing rate at 8 percent.

The bank said it will maintain tight monetary policy stance until there is significant improvement in inflation outlook.

The recovery in external demand, driven by a weaker lira, is expected to increase the positive contribution of net exports to growth, the bank said.

Last month, the central bank lifted its one-week rate to 10 percent from 4.5 percent at an emergency policy meeting to combat the slide in the lira and high inflation. The bank forecasts an inflation rate of 6.6 percent this year.

Prime Minister Tayyip Erdogan has been resisting interest rate hikes in a bid to support growth ahead of elections.

William Jackson, emerging markets economist at Capital Economics, said the country's large current account deficit and high level of short-term external debt mean it is more likely than not that the central bank will need to maintain tight monetary conditions.