The Central Bank of Turkey (TCMB) is expected to keep its key interest rate unchanged this week, according to information from the Bank’s environment cited by various Turkish media today. This will be the second meeting of the year and is within the timeframe of the quarter in which Turkish President Recep Tayyip Erdogan said he would observe the effects of his moves, without intervening in interest rates.
The TCMB governor and the Bank’s completely corrupted policy-making board, following Erdogan’s orders, had cut the benchmark interest rate by 500 points since September to 14%, but broke the relaxation cycle at last year’s first policy-making meeting last year. month.
All 20 economists in the Reuters poll predicted that the bank would leave its key interest rate unchanged.
With real yields in very negative territory, interest rate cuts caused the Turkish pound to depreciate, which weakened by 44% against the US dollar last year. This has led to price increases on a range of goods in an import-dependent economy.
To reduce the pressures of rising inflation, Turkey reduced the Value Added Tax (VAT) on basic foodstuffs – including water, eggs, dairy, coffee, tea, fruit and vegetables – to 1% from 8% from Monday.
Official data for January showed that consumer prices rose by 48.69% year-on-year, a 20-year high. Inflation in food and non-alcoholic beverages exceeded 55%. The government has pledged to act and pledged to protect households from rising prices.
The new tax cut is expected to reduce headline inflation by 1.5 percentage points in two months, Reuters quoted three economists as saying. The cut is expected to cut about 25-35 billion pounds ($ 1.8-2.6 billion) from Turkey’s budget.
The pound is generally stable from the beginning of the year. The currency closed last week at 13.49 against the dollar. On Tuesday it was trading at 13.65 against the dollar at 2 p.m. local time.
Petros Kranias
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Source: Capital
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