Turkish central bank keeps rates on hold despite lira slide

by Reuters
Tuesday, 21 January 2014 12:18 GMT

ISTANBUL, Jan 21 (Reuters) - Turkey's central bank shied away from hiking its main interest rates on Tuesday, resisting heavy market pressure to defend a tumbling lira and fight inflation for fear of dampening economic growth ahead of elections this year.

The move will satisfy Prime Minister Tayyip Erdogan, who has railed against high interest rates and played down recent turbulence in Turkey's financial markets.

But it sent the lira to a new record low.

The lira has been hit by a corruption scandal swirling around the government since mid-December and by concerns about cuts to the U.S. stimulus programme which has flooded Turkey and other emerging markets with cheap cash.

The central bank kept its main policy rate, the one-week repo rate, at 4.50 percent, its borrowing rate at 3.50 percent and its overnight lending rate at 7.75 percent, it said in a statement after its monthly monetary policy committee meeting.

It also left its primary dealers' overnight borrowing rate unchanged at 6.75 percent.

Only five out of 15 economists in a Reuters poll had expected the bank to make any move on the lending rate.

The lira, which fell 17 percent last year and has continued to slide this year, weakened to a new low of 2.27 to the dollar after the central bank decision.

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