Turkish Central Bank keeps rates on hold as inflation increases

ANKARA

The Central Bank kept its benchmark interest rate unchanged at 7.5 percent again on Feb. 23, raising concerns amid a continuing rise of inflation rates. 

It also kept its overnight borrowing rate at 7.25 percent and its overnight lending rate at 10.75 percent, according to statement on the bank’s website.

 “Energy price developments affect inflation favorably, while other cost factors limit the improvement in the core indicators. Considering the wage developments and the impact of the uncertainty in global markets on inflation expectations and pricing behavior and taking into account the volatility in energy and unprocessed food prices, the Monetary Policy Committee stated that the tight liquidity stance will be maintained as long as deemed necessary,” said the bank. 

“Future monetary policy decisions will be conditional on the inflation outlook. Taking into account inflation expectations, pricing behavior and the course of other factors affecting inflation, the tight monetary policy stance will be maintained,” it added. 

While the move was widely expected, the bank’s lack of action concerning the increasing inflation rate has triggered concerns among analysts. 

Deputy Prime Minister Mehmet Şimşek earlier said an inflation rate that is nearing 10 percent threatens the growth potential of Turkey’s economy, citing the risks over the Turkish currency and the rising food prices.

The Central Bank also gave no inference to the simplification moves over the monetary policy. The bank had previously hinted that it would raise rates in tandem with the U.S. Federal Reserve (Fed).

Governor Erdem Başçı said last January that the Central Bank may engage in simplification in monetary policy if global economic problems are resolved or everyone agrees on how effective its other tools are.