Turkish rates increase will be limited: BNP

Turkey’s central bank will announce a smaller rate increase than some investors expect at a meeting of its monetary policy committee on Dec. 14, according to BNP Paribas.

The bank in Ankara is likely to increase the interest rate for its late liquidity window by 75 basis points, or 0.75 percentage points, to 13 percent, Erkin Işık, an economist for BNP unit Turkiye Ekonomi Bankasi, said in a note e-mailed to clients on Tuesday.

Headline inflation looks set to fall towards about 10 percent next year, unless the lira faces more selloff pressure, and services inflation was down slightly in November. On balance, therefore, we do not expect the monetary policy committee to announce a major rise in policy rates.

The lira has slumped the most among major currencies since September, as political tensions with the United States increased and inflation surged. Investors and economists have called for rate hikes of as much as 500 basis points to shackle inflation and stem the lira's decline.