Turkey cbank to hold rate at 8.5 percent after its post quake cut -...

3^min

Turkey's central bank is expected to hold its interest rate at 8.5 percent this week, a Reuters poll showed on Monday, after it eased policy last month following earthquakes that devastated the country's southeast.

The poll also showed that a minority of economists expect another rate cut. Later in the year, rate hikes are expected - but the policy reversal will depend heavily on the outcome of landmark elections set for May 14.

Last year the central bank cut its main rate by 500 basis points to counter an economic slowdown, then held it at 9 percent in December and January. It eased despite inflation having reached 85 percent last year and remaining at 55 percent in February.

The bank trimmed by another 50 basis points last month to boost industrial production and employment after the quakes killed more than 48,000 people and left millions homeless. It said the "measured" cut was "adequate" to support the recovery.

According to the median estimate of the Reuters poll of 18 economists, the central bank will keep its one-week repo rate steady at 8.5 percent on Thursday.

Yet the central bank under President Tayyip Erdogan has aggressively slashed rates over the last two years, and some expect more monetary easing before the presidential and parliamentary elections.

Six poll respondents expected a 50-point rate this month, compared to 12 that expected no change.

ING sees no change given the bank signaled that cuts will not continue in succession.

"But we can expect further macroprudential measures to maintain favorable financial conditions with the objective of minimizing the effects of the earthquakes in the period ahead," ING said.

Turkey and neighboring Syria were rocked by the Feb. 6 earthquakes which left millions in need of humanitarian aid.

Business groups and economists have said it could cost Ankara up to $100 billion to rebuild housing and infrastructure, while shaving one to two percentage points off economic growth this year.

The interest rate later this year will depend heavily on whether the opposition, which has pledged a return to orthodoxy to address inflation, will win the elections, the poll showed.

Nine year-end forecasts ranged from interest rates of 7.5 percent to 30 percent, while the median stood at 25 percent, according to the poll.

The central bank will announce its interest rate decision at 1100 GMT on March. 23.

Turkey cbank to hold rate at 8.5 percent after its post-quake cut

Turkey

Central Bank

Hold

Rate

Post

Quake

Earthquake

Finance

Economy

Banking