Fitch: Turkey to hold interest rates steady until elections

Turkey’s central bank is likely to keep its policy rate steady at 13% until the presidential elections next year, international credit rating agency Fitch said on Wednesday.

A Fitch official said in a webinar that the company expected the rates in Turkey to be hiked after the elections.

Turkey's central bank embarked on a rate-cutting cycle in the face of soaring inflation, 

The Turkish Central Bank cut interest rates 3 times this year despite soaring inflation, the last of which was on August 18 when the policy rate fell from 14 percent to 13 percent. 

Due to the low interest rate policy of President Erdogan Administration Turkish Lira depreciated at record levels, which lost 44% against the dollar last year and another 27% this year.

Erdogan defies traditional monetary policy saying “interest is the reason for inflation,” running against a global trend of increasing borrowing costs.

Erdogan’s economy policy stands on providing targeted cheap credit to boost exports and economic growth with the aim of creating a current account surplus.

But the cost of living crisis in the country makes it hard for the President who announced his candidacy in next year’s elections. 

In August, inflation in Turkey hit a 24-year high of 80.21%, up from 19.25% in August last year.