TODAY’S ZAMAN – Inflation falls below forecast, early rate meeting canceled

Inflation falls below forecast, early rate meeting canceledA monthly drop of more than 1 percentage point in consumer prices in January was expected to prompt an emergency monetary policy meeting by the Central Bank of Turkey, but the bank said on Tuesday that it will meet in three weeks, drawing thinly veiled criticism from the entourage of President Recep Tayyip ErdoIan, who has pressed for a growth-boosting interest rate cut before then.Amid a recent flurry of interest rate cuts in major emerging economies, Turkish Central Bank Governor Erdem BaII noted last week that the bank might hold an interim policy meeting this week if annual inflation fell more than 1 percentage point in January.

But Tuesdayand#39s reading came in just shy of that at 724 percent, down from 817 percent in December The central bank, which cut its main interest rate by 50 basis points last month in response to a slowing economy and easing inflation, said following the data that indicators still pointed to inflation trending lower and it would next assess the policy outlook at its scheduled meeting on Feb. 24.

Economy Minister Nihat Zeybekci said the bank should have held an interim meeting to cut rates, and urged future reductions.In another apparently critical reaction, ErdoIanand#39s aide YiIit Bulut wrote on Twitter that interest rate decisions should not be solely based on domestic price dynamics.

andlsquoUntenableand#39 job?ErdoIan, a long-time aocate of loose monetary policy, has repeatedly criticized the central bank for not cutting rates more sharply and quickly, and he is looking to boost economic growth ahead of national elections in June.Falling growth rates along with sinking oil prices have prompted rate cuts in several other emerging economies, notably Russia, which unexpectedly cut borrowing costs last week, and India, which eased in mid-January.

Nicholas Spiro, managing director of Spiro Sovereign Strategy, said Turkeyand#39s central bank was likely to remain under significant political pressure to lower rates, but justifying easing was very difficult with inflation still way above a 5 percent target.andquotWe have been taking the view for some time that Mr BaIIand#39s job is becoming untenable.

Even taking into account that he is an ErdoIan loyalist, many central bank governors would have resigned for less by now,andquot he said. The Turkish lira, which dropped to a record low of 24483 against the dollar last Friday on expectations of a rate cut, firmed to 24042 by Tuesday afternoon compared with 24330 before the inflation figures.

SOURCE: Today’s Zaman