Turkey's Central Bank holds rates steady at 19 percent as lira slips

Turkey’s Central Bank on June 17 left its key benchmark interest rate unchanged for a third month -- at 19 percent. It however signaled it was moving closer to an expected rate cut later this year, even while it nodded to renewed pressure on the Turkish lira.

Thursday June 17 2021 08:38 pm

Reuters

Turkey's Central Bank held its key interest rate at 19 percent as expected on June 17 and a statement suggested it was inching closer to a cut expected later this year, even while it nodded to renewed pressure on the lira currency.

The bank last changed its one-week policy rate in March when former governor Naci Ağbal raised it to head off rising prices, though inflation dipped a bit below 17 percent last month.

A Reuters poll shows analysts expect policy easing to begin in the fourth quarter when inflation is predicted to decline.

The lira has shed 2.5 percent this week after the U.S. Federal Reserve adopted a more hawkish tone, and after the first meeting between President Recep Tayyip Erdoğan and U.S. counterpart Joe Biden yielded no breakthroughs on key disputes.

The weakness in the lira, which touched an all-time low earlier this month, raises inflation via Turkey's heavy imports.

Central Bank Governor Şahap Kavcıoğlu, who Erdoğan named in March in a shock to markets, has said inflation should fall around September.

Erdoğan has pointed to July or August for possible rate cuts, prompting analysts to warn about premature easing that could hurt the lira and economy.