Turkey's Central Bank may hike lending rate: Survey

By Bahattin Gonultas

ANKARA (AA) - The Turkish Central Bank is forecasted to increase its upper limit of interest rates corridor at least 25 basis points, according to a panel of economists surveyed by Anadolu Agency on Thursday.

The survey in which 17 economists participated showed that almost all of them except fourteen economists anticipate between 25-150 basis points rate rise at overnight lending rate, currently 8.5 percent, which is the rate at which banks borrow from the Central Bank overnight.

The other three predicted the bank will hold the rate.

The bank's monetary policy committee is due to meet on Jan. 24 to decide about raising, holding or lowering interest rates.

The fourteen economists participating in the survey also expect to rise in the overnight borrowing rate, under which banks lend or deposit money to the Central Bank by 50-125 basis points, which currently stood at 7.25 percent.

Currently the one-week repo rate stands at 8 percent, the upper limit of interest rate corridor at 8.50 percent and lower limit of the corridor at 7.25 percent after the Central Bank hold all rates in its last meeting on Dec. 20, 2016.

Recently, the bank introduced foreign exchange deposits against the local currency under a swap mechanism to deal with volatility in the Turkish lira’s value after the lira has lost 20 percent of its value against the greenback since November last year.

The swap mechanism, in which the banks lend liras to the Central Bank while borrowing dollars to pay at a due date with predetermined interest rate, is expected to cut down the lira's liquidity and boost the Turkish currency as the cost of borrowing from banks in the local currency increases.