Azernews.Az

By Bloomberg

Turkey’s central bank left all its main interest rates unchanged on Tuesday, citing the need for cautious monetary policy amid volatility in food prices. The lira strengthened.

The bank kept its main one-week repo rate at 7.50 percent, matching the median estimate in a Bloomberg survey of 19 economists. It also kept its overnight lending and borrowing rates at 10.75 percent and 7.25 percent respectively, according to a statement posted on its website.

Policy makers cited a slowdown in inflation as it cut the benchmark by a total of 75 basis points in the past two months. Inflation accelerated in February while food prices rose as the lira extended its decline this year to more than 10 percent.

Central bank Governor Erdem Basci, who has come under frequent criticism from the government for not cutting interest rates fast enough, briefed President Recep Tayyip Erdogan on monetary policy on March 11. Erdogan said he ended the meeting on good terms with Basci and refrained from publicly urging the governor to lower borrowing costs.

“Uncertainty in global markets and elevated food prices necessitates maintaining the cautious stance in monetary policy,” the bank’s Monetary Policy Committee said in the statement. “Accordingly, the Committee decided to keep the interest rates at current levels.”

The lira extended gains after the decision and was trading 0.5 percent higher at 2.6123 per dollar at 2:35 p.m.

The February acceleration in inflation will probably prove to be temporary, Odeabank chief economist Inanc Sozer said by e- mail. The Turkish central bank will make future rate decisions based on domestic food prices and monetary policy in the U.S., he said.

“Even as recent depreciation in the lira led to a temporary acceleration in inflation, we see an improvement in inflation due to weak domestic demand,” Sozer said. “The course of food prices at home and the outcome of the U.S. Fed meeting this week will shape the bank’s decision in April.”