Turkish Central Bank expected to keep interest rates steady

ISTANBUL

Central Bank Governor Erdem Başçı has been under pressure from senior government officials to lower interest rates. AA photo

The Central Bank convenes to decide on interest rates Sept. 25, but it is not expected to make any changes as it tries to balance combating high inflation with political pressure for lower rates.

Seventeen economists surveyed by the state-run Anadolu Agency said they expected the one-week repo rate to remain at 8.25 percent, the marginal funding rate to remain at 11.25 percent and the borrowing interest rate to remain at 7.50 percent.

Only two economists predicted a change in borrowing facilities provided for primary dealers via repo transactions between 0.25 and 0.50 basis points. Three economists expected the marginal funding rate to decrease by 0.25 or 0.50 basis points.

Last month, the Bank unexpectedly lowered its overnight lending rate in a move seen as having little easing impact and intended more as a signal to the government that it is supporting the economy.

Since an emergency rate hike in January, which saw the main one-week policy rate more than doubled, the Bank has cut the one-week repo rate by 175 basis points in three months, fanning criticism from some economists that it was caving in to political pressure despite persistent inflation.

The Bank has been under tight pressure from higher-than-expected inflation levels, which have pushed up to above the seasonal average due to drought that curbed crop supply.