Turkey to keep rate at 14% despite 80% inflation

Turkey’s central bank is expected to keep its key rate unchanged at 14% for an eighth meeting next week, a Reuters poll showed on Friday, amid a global tightening cycle and runaway inflation near 80% that shows no signs. of fall.

Most economists expect the key interest rate to remain stable until the end of the year, reflecting no apparent reversal in President Tayyip Erdogan’s unorthodox economic policy plan.

The central bank halted an easing cycle in January after its cuts totaling 500 basis points last year sparked a currency crisis, sending inflation to 24-year highs, fueled in part by soaring prices energy due to Russia’s invasion of Ukraine.

The 14 economists who took part in the Reuters poll expected the central bank to hold its benchmark rate at next week’s policy-setting meeting.

Seven of the nine economists surveyed expect the key rate to remain at the same level by the end of the year. One expected a reduction to 12% by then, while another predicted a rise to 20%.

The central bank has kept rates at 14% for the past seven meetings, leaving real rates deep in the negative even as a global tightening cycle puts more pressure on the lira.

The bank raised its end-of-year inflation to 60.4% last month and saw it peak at nearly 90% in the fall. That compares to a year-end forecast median of 70% in the latest Reuters poll and a level of 79.60% reported for July.

Economists say the central bank will not raise rates as Erdogan has tightened his grip on the bank after reshuffling the bank’s leadership over the years, including firing three governors in as many years.

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