ISTANBUL Feb 19 Turkey's central bank told
economists on Wednesday it expects average funding costs to
hover at around 10 percent for the foreseeable future,
signalling it has no plans to hike interest rates further in the
The bank raised rates sharply in an emergency policy meeting
on Jan. 28, pushing the average cost of funding for banks
to over 10 percent from 7.26 percent beforehand. It
was at 10.03 percent as of Feb. 18.
It left rates on hold at its latest policy meeting on
Tuesday after the emergency hike helped stabilise the lira,
shying away from further tightening for fear of hitting growth
ahead of elections next month.
January's big hike stunned investors and ignored strong
opposition from Prime Minister Tayyip Erdogan, who has built his
reputation on Turkey's economic growth over the past decade. He
has been a vocal opponent of rate hikes, fearing they will lead
to a slowdown just as Turks go to the polls.
In a closed-door meeting with economists on Wednesday,
members of the monetary policy committee said they had opted for
the decisive move in January - when they lifted each of the
bank's main rates by around 500 basis points - rather than a
gradual increase over a longer period.
"The central bank signalled no further rate changes for the
foreseeable future, given its strong and front-loaded action in
January," Muhammet Mercan, an economist at ING bank, said in a
note to clients following the meeting.
Economists said the central bank also repeated that if
deemed necessary, liquidity policy may be tightened further.
The lira was trading at 2.1846 to the dollar by
1033 GMT, much stronger than the record low of 2.39 it hit on
Jan. 27, a day before the emergency rate hike.
But it could come under renewed pressure in the months ahead
as Turkey enters a potentially turbulent election period and its
wide current account gap leaves it one of the most vulnerable
emerging markets to the winding back of U.S. monetary stimulus.
(Reporting by Nevzat Devranoglu and Behiye Taner; Writing by
Seda Sezer, Editing by Nick Tattersall and Toby Chopra)