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UPDATE 1-Turkey's cenbank head says no early change in tight policy stance
February 9, 2017 / 3:58 PM / 8 months ago

UPDATE 1-Turkey's cenbank head says no early change in tight policy stance

(Recasts, adds analyst comment, lira, context)

ANKARA, Feb 9 (Reuters) - Turkey’s central bank will stick to a tight policy stance until inflation eases, its governor said on Thursday, offering some clarity to investors about its commitment to new measures introduced last month to shore up the lira currency.

Rather than hiking a single benchmark rate in the face of rising inflation and a weakening lira, the central bank has adopted a system of multiple rates. Last month it upped the complexity with additional measures, including closing off some funding taps.

People familiar with the bank’s thinking have told Reuters it will continue with those unorthodox measures at least until a peak in inflation expected later this year.

“The current policy stance indicates a clear and stable tightening which will be preserved until there is a significant improvement in inflation dynamics,” Governor Murat Cetinkaya said in a speech to investors in London, according to a summary of his comments released by the bank.

The central bank would continue to use all available instruments in pursuit of price stability, he said, adding inflation may further edge up in the short term before gradually easing to 8 percent at the end of the year.

The lira, one of the worst performing emerging market currencies over the past two years, firmed nearly 1 percent to 3.6850 against the dollar on Thursday.

“The central bank governor’s speech ...may have affected lira’s performance positively,” said Erkin Isik, a strategist at TEB BNP Paribas. “If the markets are convinced that the bank will maintain its tight policy, we may see further strengthening.”

President Tayyip Erdogan, who wants cheaper credit to fuel consumption and revive the economy, has declared himself an “enemy” of interest rates.

As well as worries that Erdogan’s views may impinge on the central bank’s independence, the Turkish currency has been hit by concerns about security, political uncertainty and a slowing economy.

Reporting by Nevzat Devranoglu, Behiye Selin Taner, Ece Toksabay; Writing by David Dolan; Editing by Daren Butler and John Stonestreet

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