Turkey’s central bank has kept its main interest rates unchanged in April but continued to tighten monetary conditions by raising its liquidity lending rate to its highest level since 2015.
Today’s decision from Turkish policymakers comes after the country’s voters approved a major constitutional referendum that will award sweeping new powers to the office of the presidency from 2019.
Faced with climbing inflation and a weak currency, policymakers raised the central bank’s late liquidity lending rate by 50 basis points to 12.25 per cent – defying forecasts of no change this month. Its three other rates were left on hold.
In a statement accompanying the decision, the central bank said its “tight” monetary stance would stay in place until inflation expectations show signs of moderating. Consumer price growth in the Turkish economy is at its highest since 2008 at 11 per cent.
Having suffered its worst quarterly contraction since the financial crisis in the middle of last year, growth managed to rebound strongly at the end of 2016.
“Recently released data indicate a gradual recovery in the economic activity”, added the central bank.
The lira strengthened 0.4 per cent against the dollar on the day following the release.