Turkey Keeps Rate at 19% but Adopts Hawkish Stance

Source: Bloomberg

The Central Bank of the Republic of Turkey on Thursday maintained policy rates, while shifting to a more hawkish stance.

• The Monetary Policy Committee left the benchmark interest rate at 19% for the third consecutive month, in line with market expectations.
• The central bank said it wills current “tight” policy stance will continue to be maintained “decisively” until inflation decelerates as expected.
• Governor Sahap Kavcioglu believes inflation peaked in April, and will taper down to 12.2% by the end of the year.
• The lira traded 0.4% down to 8.6402 versus the greenback following the policy rate announcement. It has depreciated over 15% against the greenback since March.
• The currency has the weakest performance among emerging markets so far this year.
• President Recep Tayyip Erdogan earlier reiterated the need to cut down interest rates by July or August, but was shut down by Kavcioglu.
• Economists expect a rate cut as early as the third quarter, while others anticipate this in the fourth quarter of the year.