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Turkish CB Governor says Policy Rate to be above Inflation

ISTANBUL (Reuters) -Turkish Central Bank Governor Sahap Kavcioglu said on Friday the policy rate will be set above actual and expected inflation , according to two sources who are participating in the bank’s investor meeting.

In his speech, Kavcioglu said the benchmark rate will be kept above inflation until strong indicators pointing to a lasting fall and the central bank reaches its 5% medium-term target, according to one of the sources.

Kavcioglu also said the bank maintained its outlook for inflation to show a marked fall at the start of the fourth quarter at the latest, sources said. The policy rate currently stands at 19%.

Turkey’s inflation unexpectedly fell to 16.59% in May due to the COVID-19 lockdown, but according to a Reuters poll it is expected to rise to 17% again in June. The data is scheduled for release on July 5.

The Turkish lira has lost more than 14% of its value so far this year, triggering inflation through imported goods. The central bank’s year-end inflation forecast stands at 12.2%, still well below market expectations.

Reporting by Can Sezer and Ali KucukgocmenWriting by Ezgi ErkoyunEditing by Daren Butler and Louise Heavens

Source: Reuters

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