Turkey leaves Benchmark rate unchanged for 12th month

The Central Bank yesterday left its benchmark interest rate unchanged, marking a year of record-low borrowing costs that have fueled a surge in economic growth. The CB kept its one-week repo lending rate at 7 percent, meeting the expectations of all 13 economists in a Bloomberg survey. It also slashed its overnight borrowing rate from 5.75 percent to 1.75 percent, saying it wants to encourage banks to lend to one another at longer maturities rather than depositing cash with the CB. Bank Governor Durmus Yilmaz said last month that he will probably keep rates on hold until the last quarter of next year because core indicators show that inflation is likely to slow even as the economy expands. Gross domestic product grew about 11 percent annually in the first half, and the government forecasts expansion of 6.8 percent for the full year. Inflation slowed to 8.6 percent last month from 9.2 percent a month earlier, and core inflation, excluding food, energy and non-alcoholic drinks, dropped to 2.5 percent. Yilmaz aims to bring inflation down to 5.5 percent by the end of next year, and the CB said Thursday that price developments are in line with those goals.