Central Bank to keep interest rates steady, according to Reuters poll

Following the general elections held last year, the CBRT has raised its policy rate by 3,650 basis points since June as a result of the tightening supported by the president. With the policy rate rising to 45 percent last month, the bank stated that it had reached a sufficient level of tightness.

Fatih Karahan was appointed as the Governor of the CBRT at the beginning of this month. In the inflation report, which was his first meeting in the public eye, Karahan gave the message that they are committed to a tight monetary policy; he pointed out that they need to determine the level of tightness by taking into account not only this year's inflation but also next year's.

Karahan had said, "We assess that we have reached the level of tightness required for disinflation with the level the policy rate has reached and the other steps we have taken... The fact that our policy stance will be maintained for a longer period than previously projected in line with our intermediate target will also positively reflect on the main trend (of inflation)."

YEAR-END INTEREST RATE EXPECTED TO BE 37.5 PERCENT

According to the Reuters poll, the policy rate is expected to be at the 37.5 percent level at the end of the year. Only one of the 10 institutions that responded to the relevant section of the poll expects a 45 percent policy rate at the end of the year. Estimates range between 35 percent and 45 percent.

The CBRT's inflation forecast is at 36 percent for this year and 14 percent for next year. Market estimates for this year are between 40 percent and 45 percent.

As local elections approach, markets continue to closely monitor the upside risks that factors such as the minimum wage may create on the Central Bank's 36 percent inflation forecast for the end of the year.