Turkish cenbank holds rate at 17% after sharp hikes

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ISTANBUL, Jan 21 (Reuters) - Turkey's central bank held interest rates steady at 17% on Thursday as expected, holding fire after having sharply tightened policy late last year as inflation rose well above target to near 15%.

New bank Governor Naci Agbal had raised the one-week repo rate by 675 basis points since November to support the lira and counter inflation, which was 14.6% last month and has been mostly double digits for three years.

In a Reuters poll, the median estimate of 20 economists was for no change to the 17% policy rate. Three of those expected a hike to 17.50%, while two others forecast 18%.

Agbal was appointed in November as part of a surprise overhaul of Turkey's economic leadership in which President Tayyip Erdogan pledged a new market-friendly economic era including tough decisions to lower price rises.

The lira has since rallied from record lows on new foreign inflows and Agbal's pledge to keep policy tight.

But investors were rattled last Friday when Erdogan said tight policy does not serve Turkey and he repeated his unorthodox view that the solution is to cut rates in order to lower inflation. (Reporting by Daren Butler; Editing by Jonathan Spicer)