ISTANBUL (Reuters) – Turkey’s central bank is expected to keep its policy rate unchanged at 24 percent at a rate-setting meeting next week, a Reuters poll showed on Friday, maintaining support for the lira currency as inflation eases.
Inflation stood at just above 20 percent in December, down from a 15-year high of 25.24 percent in October. The central bank hiked its one-week repo rate <TRTINT=ECI> to 24 percent last September to help support the tumbling lira <TRYTOM=D3>.
Nineteen of 21 economists surveyed in a Reuters poll said they expected the central bank to keep its one-week repo rate flat at 24 percent. It is expected to announce the decision at 1100 GMT on Wednesday, Jan. 16.
One economist said he expects the rate to be cut to 22.5 percent, while another estimated it would be lowered to 23.5 percent.
Burak Kanli, chief economist at QNB Finansinvest, said he did not expect the central bank to cut borrowing costs this time but that its statement could be more dovish, adding that the bank might start lowering rates in April.
“There will be a substantial fall in inflation and, when we take into account the slowdown in economic activity, I don’t think that a rate cut by the central bank in that period would be regarded as strange by the market,” he said.
The lira shed nearly 30 percent against the dollar last year amid investor concerns about the central bank’s ability to resist pressure from President Tayyip Erdogan to cut borrowing costs in order to boost economic growth.
The bank’s decision in September to hike its main rate to 24 percent helped the lira recover some of its losses. It came under renewed pressure after a bigger-than-expected fall in inflation in November and December fuelled concern that the bank would cut rates earlier than warranted.
The lira stood at 5.4450 to the dollar at 1153 GMT on Friday, down 2 percent from last Friday. It hit a record low of 7.24 against the greenback on August 13.
Last year’s currency crisis also exposed the fragility of Turkey’s economy, which is reliant on foreign credit. Banks are seen as particularly vulnerable, because of both their own external financing and the likelihood that the crisis will cause more firms to default on debts at home.