Turkish Central Bank Keeps Rates on Hold at 8.5%

By Ed Frankl

Turkey's central bank on Thursday kept its key policy rate unchanged for the second meeting in a row--the last ahead of the first round of elections on May 14--as inflation remains high and recent bank failures add threats to financial stability.

The central bank kept its policy rate stable at 8.5%, after holding it steady in March, having last cut it in February by 50 basis points in order to support economic activity after the earthquakes that hit the south of the country.

Economists also expected the central bank to keep rates at 8.5%, according to a consensus forecast provided by FactSet.

Financial stability concerns, triggered by recent bank failures, add to recession concerns in developed economies alongside supply constraints, the central bank said.

However, leading indicators show that economic activity in the earthquake-hit zone has been recovering faster than expected, though it is still expected to affect economic activity in the near term, the bank added.

Inflation in Turkey cooled to 50.5% in March, but remained at high levels as food prices climbed, though the rate has eased from a 25-year high of 85.5% in October 2022.

Despite earlier signals that the central bank could cut rats again, the institution has become more concerned about depreciation pressure on the Turkish lira ahead of the elections, according to UniCredit analysts in a note ahead of the rate decision.

Write to Ed Frankl at [e-mail]

(END) Dow Jones Newswires

04-27-23 0729ET