ISTANBUL: Turkey’s central bank kept interest rates on hold yesterday but said capital inflows had fallen and hinted it could act again to support the lira, under pressure from domestic unrest and uncertain global liquidity conditions.
Turkish assets have been volatile since the end of May as anti-government protests flared, unnerving investors already worried by an expected slowdown in the flow of cheap money from major economies including the United States.
The bank kept its main policy rate, the one-week repo rate, at 4.50 percent, its borrowing rate at 3.5 percent and overnight lending rate at 6.5 percent.
“Ongoing uncertainties regarding the global economy and the volatility in capital flows necessitate monetary policy to remain flexible in both directions,” the bank said in a statement after its policy meeting yesterday. It said it would make adjustments in its provision of lira liquidity as needed.
The bank has already moved to ease pressure on the currency, selling foreign exchange at auctions last week and pledging to keep monetary policy tight if need be.
The protests, which spiralled out of a campaign against plans to build on an Istanbul park, pose no immediate threat to Prime Minister Tayyip Erdogan’s government, but they have tarnished Turkey’s image as a stable oasis on the fringe of the volatile Middle East.
Reuters
