The Central Bank of the Republic of Turkey has held interest rates at current levels for the ninth consecutive month, the bank said in a statement on Tuesday.
The bank’s monetary policy committee left the one-week repo rate, which is the rate applied to one-week loans to banks, at 7.5 percent, and the overnight rate for banks at 10.75 percent.
The bank said in a statement that lower energy prices were favorable to the inflation outlook, but exchange-rate movements are pushing inflation higher.
"Energy price developments affect inflation favorably, while cumulative exchange rate movements delay the improvement in the core indicators. Considering the impact of the uncertainty in global markets on inflation expectations and taking into account the volatility in energy and unprocessed food prices, the committee stated that tight liquidity stance will be maintained as long as deemed necessary," the statement said.
Any decision on a rate hike would depend on a change in the inflation outlook, the bank added.
Analysts said that the Turkish central bank is awaiting an expected rate hike from the US Federal Reserve in December before taking any action.
"The Turkish central bank has limited possibilities for action before the Fed makes its move," commented Christopher Dembik, an economist with Saxo Banque in Paris.
"The bank will want to determine the effect of the Fed’s move, and then see what and how to react," he added.
"We expect the Turkish economy to surprise on the upside," said Bora Tamer Yilmaz, an economist with Ziraat Securities in Istanbul. "This year the shift to domestic demand helped economic activity gain at a healthy pace."
But growth is still not boosting inflation to an extent that the central bank is ready to hike rates.
"Growth is still moderate, although we expect it to increase more rapidly in the second half," Yilmaz said.