ANKARA: Turkey’s central bank may hold an early monetary policy meeting next week and discuss an interest rate cut if inflation continues to fall sharply, Governor Erdem Başçı said, adding that increased pressure from President Recep Tayyip Erdoğan on the bank will lower the rates.
Başçı, under pressure from Erdoğan and also the government to lower rates ahead of a June parliamentary election, said the bank could act as early as Feb. 4 if data due a day earlier show January inflation slowing by more than 1 percentage point.
The bank cut the repo rate 50 points to 7.75 percent last week. Observers have said the central bank is again risking its credibility by yielding to political pressure for rate cuts while this is bad news for lira, which only last month hit record lows against the US dollar at 2.4140.
The lira weakened to 2.36 against the dollar on his comments, reversing earlier gains after he announced a cut in the bank’s forecast for inflation this year to 5.5 percent from a previous 6.1 percent.
“We could hold a meeting to take a rapid decision,” Başçı told a news conference called to announce the bank’s quarterly inflation report. “If January inflation falls more than one (percentage) point and core (inflation) is good, we could even make an assessment on Feb. 4,” he added. The next monetary policy committee meeting is scheduled for Feb. 24.
