Credit Whipsaw That Hit Turkey Isn’t Taking Cue From Rate Pause

Turkish interest rates may be high enough to put the screws on credit growth.

Although official borrowing costs have stayed on hold since December, the pace of annual lending expansion has been below inflation over the past two months, suggesting central bank Governor Naci Agbal can afford to keep the key rate at 17% at this week’s meeting.

Credit Whipsaw That Hit Turkey Isn’t Taking Cue From Rate Pause

Since his surprise appointment on Nov. 7, Agbal raised the policy rate by 675 basis points in two steps before pausing in January. The boom in lending has also continued to fizzle out thanks to a decision in November to remove a rule that pressured banks to extend credit.

“The slowdown in the pace of the loan growth momentum suggests that monetary policy has been tightened enough to contain demand-led pressures,” said Cagdas Dogan, a banking analyst at BGC Partners in Istanbul.

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