Turkish Central Bank not expected to hike rates.

By bne IntelliNews January 17, 2014

The Central Bank is not likely to hike rates at its monetary policy committee meeting next Tuesday, shows a poll of economists by Reuters.

Ten out of 15 analysts polled said they expected the Central Bank to keep rates unchanged at Tuesday's meeting while five said the Bank would increase the overnight rate, currently at 7.75%.

Despite the sharp loss of value of the local currency, the Central Bank has resisted to the calls for a rate hike, most probably due to pressure from the government. The government which has engaged in a politically damaging power struggle with US-based Islamic scholar Fethullah Gulen, does not want have a disappointing GDP growth in the run-up to the crucial local elections in March and presidential election in August.

The government would be reluctant to support a rate hike decision also because PM Recep Tayyip Erdogan had blamed what he called “the interest rate lobby” for the nationwide anti-government protests last summer. The PM also claims that the very same lobbying groups are behind the recent graft probe, aiming to undermine his government.

TRY weakened to a new record low of 2.2 against USD on Thursday on the corruption scandal related developments. U.S FED’s tapering also puts additional pressure on the local currency.

The poll also showed that economists expect the Turkish economy to grow 3.3% this year, below the government forecast of 4%. 

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