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(Bloomberg) — Turkey’s central bank wants to see more evidence of slowing inflation and clarity on the Iran conflict before resuming monetary easing, Governor Fatih Karahan has told investors.
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At a conference organized Friday by JPMorgan Chase & Co in Istanbul, Karahan refrained from providing specific interest-rate guidance, according to people with knowledge of the discussions. He said that while discussions are taking place on whether to resume easing, rate-setters want to see what the July inflation print shows, the people said, asking not to be named while discussing closed-door conversations.
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The central bank also wants more insight into developments regarding the Iran war, the governor told investors at the conference, which was also attended by Finance Minister Mehmet Simsek.
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The central bank declined to comment.
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The July inflation reading is due August 3 and will be scrutinized to see if price pressures are continuing to ease, after data showed inflation cooled in June for the first time since the outbreak of the Iran war. That data led markets to speculate the central bank will ease policy in some form at its July 23 meeting.
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Karahan said policymakers would adopt a meeting-by-meeting approach, dismissing any “autopilot” decisions, the people said. While the central bank has not decided on what approach to take if it were to ease policy, he listed the following options:
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- Return to funding from the main rate of 37% by restarting one-week repo auctions
- Maintain funding via the overnight lending rate 40% while resuming the weekly repos
- Cut the overnight lending rate of 40% and continue to use that as the main funding rate
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June’s inflation decline was largely down to a fall in energy prices after a ceasefire agreement between the US and Iran. However, crude prices have risen again amid a flare-up in fighting that strained the truce and investors are closely monitoring ongoing talks to end the war.
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As an oil importer, Turkey is sensitive to energy prices, which have a significant impact on transportation and other costs. The central bank has repeatedly emphasized caution, and in a presentation published on the central bank’s website Friday, Karahan said core goods inflation had “firmed” recently.
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