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Turkish Central Bank remained key interest rates unchanged

Turkish Central Bank remained key interest rates unchanged at its meeting on Tuesday and surprised economists, who had expected an increase. Meanwhile, the Turkish lira remained under pressure against the US dollar due to growing security concerns, the growing geopolitical risks and the potential for further increases in US interest rates.

Monetary Policy Committee in Ankara announced that it leaves the benchmark one-week repo rate at a level of 8%. The overnight interest rate on loans was 8.5% and that on deposits – 7.25%.

The economists predicted that the key interest rate (one-week repo rate) will be increased to either 8.25%, or 8.50%. The market expectations, however, were that the overnight rate on deposits will remain the same.

Although the purpose of the Bank is to control inflation, the Turkish economy contracted in the third quarter for the first time in seven years. The annual decrease over the period July-September amounted to 1.8%. The growing uncertainty after the failed coup attempt in July shrank domestic consumption in Turkey and harm tourism, which affected the economy.

Turkish Central Bank raised interest rates in November for the first time in almost three years to stem the slide in the Turkish lira. However, the central bank’s move couldn’t help to ease the downward pressure on the currency.

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