Central Bank keeps rates on hold

ISTANBUL - Reuters

Turkey’s central bank kept all key interest rates on hold yesterday, sticking instead to tight liquidity management to counter double-digit inflation and bolster the lira currency.

The bank kept its main policy rate, the one-week repo rate, at 5.75 percent, and its overnight lending rate at 11.5 percent and borrowing rate at 5 percent. All 13 analysts polled by Reuters had expected it to keep its main rates on hold.

The central bank also said it would raise the amount of lira reserves that banks can keep in foreign currency to 45 percent from 40 percent from June, in a move analysts saw boosting central bank reserves without necessarily undermining the lira.

The bank said in a statement that this additional facility would boost central bank reserves by $2.1 billion and provide 2.8 billion lira liquidity if use of the facility remains at current levels.

The lira was little changed at 1.8367 against the dollar, compared with 1.8361 before the central bank statement.

“The Central Bank has made it clear that it really cares about the lira now,” said Timothy Ash at Royal Bank of Scotland.

“The Central Bank is allowing banks to keep more RRRs in forex with the aim to boost its gross reserves in the process - boosting ammo at the CBRT in case we see more downside pressure on the lira.”