Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Turkey Holds Rates in First Meeting Under New Central Banker

Published 04/15/2021, 07:01 AM
Updated 04/15/2021, 07:36 AM
Turkey Holds Rates in First Meeting Under New Central Banker

Turkey Holds Rates in First Meeting Under New Central Banker

(Bloomberg) -- Turkey’s central bank left its benchmark interest rate unchanged in the first monetary policy meeting under its newly appointed governor.

The Monetary Policy Committee left its key rate at 19% Thursday, in line with the forecasts of most analysts in a Bloomberg survey. The two dissenters, HSBC Bank PLC and Capital Economics Ltd, predicted the meeting would deliver a reduction of 50 and 200 basis points, respectively.

The lira extended gains after the decision and was trading 0.7% higher at 8.0252 per dollar at 2:01 p.m. in Istanbul.

Installed after President Recep Tayyip Erdogan abruptly fired his predecessor following a bigger-than-expected rate increase, Sahap Kavcioglu was under pressure to reduce rates but has so far signaled he would not rush to loosen the stance he inherited.

In a written interview with Bloomberg after his appointment last month, Kavcioglu said markets shouldn’t view a rate cut at the April 15 Monetary Policy Committee meeting as a given, easing some concerns among investors.

“Kavcioglu’s initial communication to markets has done enough to alleviate apprehensions,” said Ehsan Khoman, Head of Emerging Market Research for Europe, Middle East and Africa at MUFG Bank in Dubai. Turkey “does not have the policy room to lower rates this year given the elevated inflation outlook” but Kavcioglu’s dovish views suggest the central bank will eventually take a more accommodative stance, he said before the meeting.

Turkey raised its benchmark by 200 basis points on March 18, at Naci Agbal’s final rate-setting meeting as governor, elevating the key rate adjusted for inflation to one of the world’s highest. A professor of banking, Kavcioglu was among the critics of that move, saying it could damage economic growth.

Last week, Erdogan said the government was determined to both reduce inflation and cut interest rates to single digits, prompting a slide in the lira. The currency has weakened more than 10% against the dollar since the unexpected appointment of Kavcioglu. Foreign investors sold a net $1.2 billion in Turkish equities and a net $1.25 billion in government bonds and the benchmark Borsa Istanbul 100 Index slid 7.6% during the same period.

Inflation accelerated to an annual 16.2% through March, up from 15.6% the previous month because of a global oil rally and weaker currency, leaving the new central bank chief little room to enact the interest-rate cuts that would mollify Erdogan, who holds the unorthodox view that high interest rates cause inflation.

©2021 Bloomberg L.P.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.