POLL-Turkish cenbank to keep policy rate at 13% after surprise cut in August


By Ali Kucukgocmen

ISTANBUL, Sept 15 (Reuters) - Turkey's central bank is expected to keep its policy rate unchanged at 13% next week, a Reuters poll showed on Thursday, after the bank surprised with a rate cut last month even as inflation remains above 80% and shows no signs of easing.

Inflation has soared since last autumn when the central bank embarked on an easing cycle in line with President Tayyip Erdogan's unorthodox policy. Soaring energy and commodity prices have also pushed prices higher.

The bank cited indications of an economic slowdown in the third quarter as it shocked markets with a 100-basis-point cut in August, despite expectations that inflation will continue to rise.

Eleven of 14 economist that participated in the Reuters poll for September's rate decision predicted that the central bank will leave the one-week repo rate TRINT=ECI at 13%.

One predicted a 50-basis-point cut to 12.50%, while two forecast a 100-basis-point cut to 12%.

Liam Peach, senior emerging markets economist at Capital Economics, said the central bank may use softening growth as an excuse to cut interest rates further this month, after data showed on Tuesday that industrial production declined month-on-month in July.

The central bank said the policy rate is "adequate under the current outlook" after last month's cut. Bankers said the statement likely indicated that the central bank will not cut rates further for now.

Erdogan has prioritised exports, production and investments as part of a new economic programme that aims to lower inflation by flipping Turkey's chronic current account deficits to a surplus.

That target is all but unattainable this year due to the surge in energy prices and a global economic slowdown that is likely to hit Turkey's exports.

The government does not a see a surplus in the next three years. It sees inflation falling to 65% by the end of the year and to 24.9% at the end of 2023.

Last year's easing cycle led to a currency crisis that saw the lira end the year down 44% against the dollar. It has shed more than 27% so far this year, which in turn feeds inflation.

Many economists have been declining to participate in Reuters polls for the central bank due the difficulty of predicting its moves given pressure from Erdogan for lower rates.

Three economists predicted that the policy rate would stand at 12% at end-2022, while five others predicted it would remain at 13%.

Since last month's cut, the central bank has taken steps that are meant to address the widening gap between the bank's policy rate and lending rates.

One move was mandating banks to hold bonds for loans with interest rates above a certain level. Economists will also look for guidance on further steps from the monetary policy committee statement.

The central bank will announce this month's rate decision at 1100 GMT on Sept. 22.

(Reporting by Ali Kucukgocmen Editing by Daren Butler)

((ali.kucukgocmen@thomsonreuters.com , @alikucukgocmen; +905319306206; Reuters Messaging: Reuters Messaging: ali.kucukgocmen.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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