Turkey's central bank hikes key interest rate to 24 percent

Erdogan appoints himself chairman of Turkey's sovereign wealth fund

Erdogan appoints himself chairman of Turkey's sovereign wealth fund

He has repeatedly blamed the central bank for high inflation, which hit nearly 18% last month, its highest level since 2003.

Neil Wilson, chief market analyst at Markets.com said: "This was a definite statement from policymakers, but the risk now is that the market tries to test the central bank's resolve: the horse may have already bolted".

The increase, which was higher than expected, boosted the lira by five percent against the dollar and may ease investor concern about Erdogan's influence on monetary policy.

Before today's interest rate decision, Mr Erdogan announced he was banning the use of foreign currencies in property sales, rental contracts and leasing transactions and ruled all such transactions must now be made in lira.

It described the hike as a "strong monetary tightening to support price stability".

The next two Monetary Policy Committee meetings are to be held in October.

But Neuteboom of ABN Amro said much more was needed for Turkey to turn around "the negative spiral" the economy is in.

Its decision came despite Erdogan repeating his opposition to high interest rates earlier in the day, saying high inflation was a result of the central bank's wrong steps.

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Ignoring calls for restraint from President Recep Tayyip Erdoğan, the bank raised its main short-term rate from 17.5% following weeks of pressure from global investors.

Currently, the interest rates are below the annual inflation level in Turkey. "If you say "inflation is the cause, the rate is the result", you do not know this business, friend", he added.

Anthony Skinner, director of Middle East and North Africa at Verisk Maplecroft, told AFP he believed the hike had already been agreed. "Erdogan´s speech. was meant to put distance between himself and the (bank´s) decision".

It has now increased interest rates by 11.25 percentage points since late April as it struggles to bring the lira out of freefall.

The lira has plunged in recent weeks on concerns over domestic policymaking and a crisis in relations with the United States.

Turkey's currency and inflationary troubles are also compounded by the threat of steel and aluminium tariffs from the U.S. as well as sanctions over the detention of an American evangelical pastor.

The rate rise comes on the same day as the Bank of England left the interest rate untouched at 0.75%, citing heightened risks to global growth as a result of volatility within emerging markets, as well as tensions between the USA and China.

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