Turkey's Central Bank Holds Rate At 19.00%

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Turkey's central bank maintained its key interest rate, as widely expected, at the first meeting rate-setting meeting of Sahap Kavcioglu as the governor.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey decided to hold the key one-week repo rate to 19.00 percent.

President Tayyip Erdogan appointed Sahap Kavcioglu as the new central bank governor after the bank lifted the interest rates by 200 basis points at the March meeting under the leadership of Naci Agbal.

During Agbal's short tenure, the key one-week repo rate was raised by 875 basis points.

At the rate-setting meeting, the MPC said the decelerating impact of the current monetary stance on credit and domestic demand is envisaged to become more significant in the upcoming period.

Accordingly, the MPC decided to maintain the tight monetary policy stance by keeping the policy rate unchanged.

The bank said it will continue to use decisively all available instruments in pursuit of the primary objective of price stability.

"The policy rate will continue to be determined at a level above inflation to maintain a strong disinflationary effect until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is reached," the bank said.

With the one-week repo rate at 19.00 percent and inflation at 16.2 percent, that already offers scope to reduce rates, William Jackson, an economist at Capital Economics, said.

While the decision suggests that the risks to year-end forecast for the one-week repo rate to be cut to 10.0 percent by year-end now lie to the upside, significant easing still appears to be on the cards, the economist added.

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