(Bloomberg) -- Turkey’s central bank defied market expectations and held interest rates unchanged in its first monetary policy decision since President Recep Tayyip Erdogan appointed his son-in-law the country’s new economy czar. Stocks and the USD/TRY plunged.
The bank held its one-week repo rate at 17.75 percent, a full percentage point less than the median estimate of analysts in a Bloomberg survey. The lira fell as much as 4.2 percent to 4.9384 to the dollar.
"This is a shocking decision given that inflation accelerated sharply and the lira weakened to a new record low earlier this month,” said Piotr Matys, a currency strategist at Rabobank in London.
Tuesday’s decision was under close scrutiny by investors who’ve been seeking an indication of where monetary and fiscal policies might be headed after Berat Albayrak, 40, was named treasury and finance minister earlier this month. Albayrak has in the past written extensively in support of unorthodox economic views held by Erdogan, who’s adamant that inflation will only slow if borrowing costs for companies and households are lowered.
Without directly disputing those views, Albayrak used his first interview in his new role to voice generally mainstream policies on the importance of maintaining the central bank’s independence, saying that policy actions will be in line with economic realities and the requirements of the markets.
Read more: The battle over central bank independence explained