Turkey's Central Bank leaves rates unchanged amid pressure

Turkey?s Central Bank left interest rates on hold on March 17 as the lira?s slide to record lows risked stoking inflation, resisting pressure from political circles to cut rates ahead of a June election.

Erdo?an?s demands for sharply lower rates to boost growth before the parliamentary election have rattled markets, contributing to the lira?s losses and raising concern about the independence of the Central Bank.

The Bank left the one-week repo rate at 7.50 percent and the overnight borrowing rate at 7.25 percent. The overnight lending rate remained at 10.75 percent and the primary dealers? overnight borrowing rate at 10.25 percent.

?Future monetary policy decisions will be conditional on the improvements in the inflation outlook,? the bank said in a statement after the monetary policy committee meeting.

Tensions between Erdo?an and the Bank appeared to ease somewhat last week after Governor Erdem Ba?ç? gave him a briefing. Erdo?an subsequently said the talks had been positive, but his adviser, Cemil Ertem, was quoted on March 16 as saying the presentation was at odds with Erdo?an?s vision for high growth.

?We think the Central Bank did the right thing and restored some of its lost credibility with that decision,? said BGC Partners chief economist Özgür Altu?.

He forecast March annual CPI inflation would fall and may pave the way for a 25-50 basis point rate cut. But political reaction to the decision, the outcome of the Fed meeting on March 18, and a Fitch Ratings assessment on March 20 would determine whether a more optimistic market tone continues.

The lira firmed to 2.6070 against the dollar after the decision, from 2.6185 beforehand.

However, some market watchers said the Central Bank had...