Azernews.Az

By Bloomberg

The lira slid to a record as an improvement in Turkey’s core inflation spurred bets the central bank will lower borrowing costs this month.

The currency dropped as much as 0.6 percent to 2.5329 against the dollar as of 2:56 p.m. in Istanbul, the fifth day of declines. The yield on two-year government bonds fell 16 basis points to 8.36 percent. A core consumer-price index seen by the central bank as a key indicator of pricing behavior slowed to 7.73 percent, a report by Turkstat in Ankara showed.

President Recep Tayyip Erdogan and other government officials have pressured Governor Erdem Basci to lower borrowing costs since policy makers more than doubled the main rate more than a year ago to stem a slide in the lira. The central bank has reduced the rate five times since then by a total 250 basis points to 7.5 percent last month. The rate-setting committee is set to meet on March 17.

“The fact that core CPI has improved below 8 percent fuels our concerns as it is the perfect excuse to revive the political pressures for lower rates,” Ipek Ozkardeskaya, a currency strategist at Swissquote Bank AS in Geneva, said by e-mail. “We wouldn’t be surprised to hear additional comments from policy makers in favor of lower rates.”

The central bank is “likely to use the weakness in core inflation as an excuse to deliver another 25 basis-point cut in March,” Yarkin Cebeci, an economist at JPMorgan Chase & Co. in Istanbul, said in an e-mailed report.

While the measure for core inflation improved, the consumer-inflation rate rose to 7.55 percent from 7.24 percent in the previous month, missing the median estimate of 7.42 percent in a Bloomberg survey of economists. That’s more than two percentage points higher than Basci’s target.

The benchmark Borsa 100 Index was little changed on Tuesday.