Central Bank likely to keep key rate same

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Central Bank likely to keep key rate same
Oluşturulma Tarihi: Kasım 17, 2008 20:00

ANKARA - Turkey's Central Bank will probably leave the benchmark interest rate unchanged at more than five times the rate in the euro zone this week to defend the Turkish lira, or YTL, from the impact of the global economic crisis.

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The Bank will keep the overnight borrowing rate at 16.75 percent according to all 16 economists surveyed by Bloomberg. The Bank will announce its decision at 7 p.m. tomorrow. Turkey is holding the cost of borrowing high, even as developing economies reduce their rates, to preserve the value of the lira and protect companies that have foreign currency debts. The YTL, has fallen 21 percent against the dollar since the start of October. The global financial crisis means Turkish monetary policy must remain "cautious," the Bank said Oct. 31.

"The Bank's major concern has to be the YTL," said Yarkın Cebeci, economist for JPMorgan Chase & Co. in Istanbul. "They know that any easing would be perceived as premature and have a negative impact on the YTL."

Turkish companies had foreign currency debts that exceeded their assets by YTL $81.4 billion at the end of June, according to the latest data from the Central Bank. A decline in the local currency would fuel inflation by driving up import costs and would raise doubts over firms' ability to finance their borrowing. Turkey's credit rating outlook was cut to negative from stable by Standard & Poor's Nov. 13 on concern the country's banks will struggle to meet their financing needs next year because of the global credit crisis.

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