Turkish cenbank governor says key rate is higher than inflation – sources

ISTANBUL, July 2 (Reuters) – Turkey’s central bank governor Sahap Kavcioglu said on Friday that the policy rate would be set above actual and expected inflation, according to two sources attending the investor meeting of the bank.

In his speech, Kavcioglu said the benchmark rate will be held above inflation until strong indicators point to a sustainable decline and the central bank hits its medium-term target of 5%, according to one of the sources.

Kavcioglu also said the bank is maintaining its inflation outlook to show a sharp decline at the start of the fourth quarter at the latest, sources said. The key rate is currently 19%.

Turkey’s inflation unexpectedly fell to 16.59% in May due to the COVID-19 lockdown, but according to a Reuters poll it is expected to hit 17% again in June. The data is expected to be released on July 5.

The Turkish lira has lost more than 14% of its value so far this year, triggering inflation through imported goods. The central bank’s year-end inflation forecast stands at 12.2%, still well below market expectations.

Reporting by Can Sezer and Ali Kucukgocmen Writing by Ezgi Erkoyun Editing by Daren Butler and Louise Heavens

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