Turkey central bank holds rates steady despite Erdogan pressure

Turkey’s central bank on Tuesday held key interest rates steady despite blistering attacks from President Recep Tayyip Erdogan urging a sharp cut ahead of June parliamentary elections.

The bank said in a statement after its latest monetary policy committee meeting that the one-week repurchase rate would be kept at 7.50 percent, the marginal funding rate at 10.75 percent and the borrowing rate at 7.25 percent.

It remains to be seen if this decision will satisfy Erdogan, who was briefed by the nominally independent bank’s governor Erdem Basci last week after accusing the monetary policy chief of treason for the failure to cut rates.

Erdogan’s bitter attacks on the central bank has severely eroded the value of the Turkish currency lira which hit all time lows against the US dollar in recent weeks.

Erdogan is eyeing strong growth to deliver a victory for his ruling AKP party in the June 7 legislative polls. If it secures a majority, the AKP could then change the constitution to give Erdogan an expanded presidential role.

The bank said in a statement structural reforms would help potential growth “significantly.”

The bank also said its current cautious monetary policy, along with prudent fiscal policies were having a “favourable impact on inflation”, and suggested its cautious stance should be maintained given the uncertainty in global markets and rising food prices.