Turkish central bank to hold rates steady amid surge in energy prices

Turkey’s central bank is envisaged to keep its benchmark policy rate steady for the third straight month this week, a survey showed Monday.

The Central Bank of the Republic of Turkey (CBRT) paused an easing cycle in January after it had cut its one-week repo rate by 500 basis points since September last year.

The authority is now expected to hold the policy rate unchanged again despite the Russian invasion of Ukraine and soaring energy prices that pose a threat to domestic inflation.

The annual consumer price index (CPI) rose more than expected to 54.44% in February, with the Ukraine conflict raising concerns of further price pressure.

The reading that marked a two-decade high was fueled by a slide in the Turkish lira late last year and higher commodity prices.

Most economists polled expect the key interest rate to remain steady through year-end.

Prices surged across the board after the lira declined 44% against the United States dollar last year and another 10% so far in 2022, mainly due to initial fallout from Russia’s invasion of Ukraine.

The government has pledged efforts to curb the price increases and protect households. But soaring global prices add further pressure on the economy which imports almost all its energy needs – vulnerable to the global rise in oil, gas and grains prices.

Treasury and Finance Minister Nureddin Nebati said the government was determined to fight rising prices as a priority and was monitoring risks from the conflict.

All 18 economists in the Reuters poll predicted the central bank will keep its one-week repo rate unchanged on Thursday at 14%, where it was set in December. The easing cycle began in September when it was cut from 19%.

The policy easing came as the government endorsed a new economic program that prioritizes low borrowing costs, a current account surplus, growth, exports, credit and employment.

Economists are raising current account deficit forecasts and cutting expected tourism income, given Russia and Ukraine are the first and third biggest respective sources of holidaymakers.

The government forecasts the $15 billion current account deficit to deteriorate only slightly to $18.6 billion this year.

The median estimate of eight of nine polled economists predicted the year-end rate at 14%. One predicted a cut to 12%.


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