FX.co ★ Turkey Central Bank Keeps Rate Unchanged

Turkey's central bank retained its key interest rate for the third straight meeting despite continuous surge in inflation.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey, governed by Sahap Kavcioglu, decided to hold the one-week repo rate at 14.00 percent.

Under pressure from President Tayyip Erdogan, the bank had lowered the rate by 500 basis points since last September.

"The Committee expects disinflation process to start on the back of measures taken and decisively pursued for sustainable price and financial stability along with the decline in inflation owing to the base effect and the resolution of the ongoing regional conflict," the bank said in the statement.

The further worsening of the inflation picture and downward pressure on the lira were, once again, not enough to persuade Turkey's central bank to raise the one-week repo rate from 14.00 percent, Jason Tuvey, an economist at Capital Economics, said.

The economist expects policy settings to be left unchanged over the coming months. Barring another collapse in the lira, inflation will drop sharply at the very end of this year and that may trigger another interest rate cut, Tuvey added.