Türkiye’s central bank is widely expected to keep its interest rate unchanged Thursday, surveys showed, in what would come ahead of a presidential runoff with incumbent Recep Tayyip Erdoğan leading the polls.
Erdoğan fell just short of the 50% threshold needed to win the vote outright in the first round on May 14. He will face Kemal Kılıçdaroğlu, the chair of the main opposition Republican People’s Party (CHP) and joint candidate of the six-party opposition Nation Alliance.
Meanwhile, the Erdoğan-led People’s Alliance won a comfortable majority in the parliamentary election, which also took place 10 days ago.
Economists expect the Central Bank of the Republic of Türkiye (CBRT) to hold its benchmark one-week repo rate at 8.5% for the third straight month.
An easing trend last year saw the monetary authority cut its key one-week repo rate by 500 basis points to counter an economic slowdown, before it held it at 9% in December and January. It justified the cuts by saying financial conditions must remain supportive to maintain the growth in industrial production.
The bank further cut the benchmark policy rate by 50 basis points after the catastrophic Feb. 6 earthquakes killed more than 50,000 people and left millions homeless. It said the "measured" cut was "adequate" to support the recovery.
The bank left the key policy unchanged in March and April.
According to the median estimate of the Reuters poll of 12 economists, the central bank will keep its key policy rate steady. The same goes for the surveys conducted by Anadolu Agency (AA) and private broadcaster BloombergHT.
The government has pledged to stick to its low-interest rates policy, the core of its economic policies, in case of a win in the elections.
It has favored lower borrowing costs as part of its economic program unveiled in 2021 to boost exports, production and investment and create new jobs.
Erdoğan has insisted that high borrowing costs cause high inflation, rejecting economic thinking that suggests raising interest rates helps curb price increases.
The government says its program eventually aims to lower inflation by flipping the country’s chronic current account deficit to a surplus.
Annual inflation has moderated over the last six months, a trend that the government says will continue in the coming period. The consumer price index (CPI) eased to an annual 43.68% in April, almost halving from 85.51% in October, a 24-year peak.