Turkey's central bank on Tuesday defied pressure from President Recep Tayyip Erdogan to consider a snap rate cut, after a slowdown in January inflation turned out to be less sharp that expected.
With elections looming on the horizon, Erdogan and his allies have over the last weeks lambasted central bank Governor Erdem Basci for failing to radically lower interest rates to stimulate faltering growth.
Basci had indicated the bank would make an unscheduled cut this week if January inflation data had shown a sharp slowing.
But in the event, data released by the state statistics office showed January inflation was 1.1 percent from December and 7.24 percent from January 2014.
The annual rate was down on the figure for 2014 as a whole of 8.17 percent but higher than the sub-7 percent rate expected by some analysts.
A year ago, the bank aggressively raised key rates to avert a major economic crisis following a steep drop in the value of the the lira.
But the high interest rates are seen as having contributed to a slowdown in Turkey's economic performance after years of strong growth that had underpinned the government's popularity.
The cental bank indicated in a statement on its website that there would be no unscheduled meeting to decide a cut and monetary policy would be considered at the next scheduled meeting in three weeks.
"Inflation indicators continue to improve in recent months owing to the implementation of cautious monetary and liquidity policies," it said.
"The Monetary Policy Committee will assess the inflation outlook in detail at the regular meeting which will be held on February 24," it said.
- 'No excuse' -
Erdogan had troubled markets by pushing for aggressive rate cuts at a time when inflation is still relatively high in Turkey, telling the bank it was "failing to get the message".
Economy Minister Nihat Zeybekci, a close ally of Erdogan, rapped the bank on the knuckles for failing to take the chance to cut rates, claiming that markets had been ready and even happy about the idea.
"It would have been much better if the monetary policy committee had convened, it should have moved towards cutting rates; markets had warmed to this idea and had been looking forward to it," Turkish media quoted him as saying.
Prime Minister Ahmet Davutoglu welcomed the drop in inflation but was more circumspect in calling for rate cuts.
"I want to emphasise that this is a reflection of positive developments in our economy. However, we strongly believe that the interest rates will be gradually lowered in the coming months," he told a meeting of the ruling party.
A top economic advisor to Erdogan, Yigit Bulut, tweeted: "There has been a decrease (in inflation) so there should not be any excuse" for not cutting.
At the other end of the spectrum, Deputy Prime Minister Ali Babacan is believed to back the central bank's policies. But he rarely comments on the issue in public.
The Turkish lira gained 0.99 percent in value after the central bank's decision to trade at 2.41 lira to the dollar.
With legislative elections looming in June, it is unlikely the government will let up at all in its pressure on the nominally independent central bank for cuts.
"The central bank is likely to come under further pressure from the government to lower rates," the London-based Capital Economics consultancy said in a note to clients.
"There's a good chance that the central bank will still lower interest rates at its scheduled meeting later this month," it added.
The central bank in January cut its main interest rate for the first time in six months but the 50 basis points cut was slammed by the government as insufficient.
While there has been a fall in energy prices, Capital Economics warned that core inflation remains "extremely high" due to price pressures stemming from "a lack of spare capacity in the economy."
Turkey's economy is under the spotlight this year as Ankara holds the presidency of the G20 top world economies.