There were no surprises as Turkey’s central bank on August 12 left its 19.00% policy rate on hold as expected by all analysts.
Capital Economics was among observers concluding that with inflation, now officially at 18.95%, likely to remain elevated in coming months, an easing cycle is unlikely to commence until the tail-end of 2021. Prior to the central bank policy meeting, the markets noted President Recep Tayyip Erdogan, known for holding sway over monetary policy, was pushing for summer rate cuts.
Central bank governor Sahap Kavciolgu has now kept the key rate unchanged at the five policy meetings he has presided over since taking the helm of the regulator in March.
The lira rallied 0.8% against the dollar after the decision to hold rates was announced.
Jason Tuvey at Capital said: “We think that an easing cycle is unlikely to commence until late this year when inflation looks set to fall sharply as the effects of previous falls in the lira start to unwind and Mr. Kavcioglu looks to fulfil the president’s desire. Our forecast is for the one-week repo rate to end this year at 17.00% and to be lowered to 12.00% by end-2022.”