Erdoğan’s aide says Turkish Central Bank may cut rates next week

ANKARA - Reuters

Turkey’s Central Bank may cut its overnight lending rate next week, despite stubbornly high inflation and a volatile lira, an advisor to President Recep Tayyip Erdoğan said on March 17.

Advisor Cemil Ertem said markets were expecting the Central Bank to keep rates on hold at its meeting next week, but there was also the chance of a rate cut.

“Such an opportunity is there for Turkey. Overnight lending, which finances the banking system, may be the subject of a discount on the upper band interest rate,” he said in a television interview.

The overnight lending rate, currently at 10.75 percent, is one of three main rates. Turkey actively controls the “corridor” between its lending and borrowing rates by tweaking the volumes of money available at these rates, such that a cut or a hike at one end of the corridor need not mean average borrowing costs change.

On Feb. 23, the Central Bank kept its rates on hold for the 12th consecutive month, raising worries about the rising inflation which was 8.78 percent in February.

The bank’s next rate setting meeting is on March 24.