Turkey central bank hikes liquidity window, but keeps other rates on hold

Reuters

Published Mar 16, 2017 07:29AM ET

Updated Mar 16, 2017 07:40AM ET

Turkey central bank hikes liquidity window, but keeps other rates on hold

ISTANBUL (Reuters) - Turkey's central bank lifted its late liquidity window rate by 75 basis points on Thursday, taking more unorthodox tightening steps after a U.S. Federal Reserve hike, but left its main policy rate on hold ahead of a referendum next month.

The central bank has largely left its benchmark rate untouched, even as it has steadily tightened liquidity by other means, pushing borrowing costs to their highest in five years.

That unwillingness to raise the policy rate - even as the lira currency has hit a series of record lows - has stoked concerns it is under pressure from President Tayyip Erdogan, who has described himself as an "enemy" of interest rates and railed against the high cost of borrowing.

The bank raised the late liquidity window rate to 11.75 percent from 11 percent, less than the 100 basis point hike that had been predicted by 15 of 23 economists polled by Reuters.

However, it left its overnight lending rate at 9.25 percent, contrary to the expectations of a hike from nearly half the economists polled.

It also left its benchmark one-week repo rate at 8 percent. All but one respondent in the poll forecast it would be unchanged.

Turks will vote on April 16 in a referendum on constitutional changes sharply boosting the president's powers. Erdogan, who advocates growth through consumption, is keen to boost the flagging economy ahead of the referendum.