Turkey's central bank raises interest rate to 24%

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DXY Index Sideways Grind Continues ahead of BOE ECB Tomorrow

He also decreed that local property sales, rental contracts and leasing transactions could no longer be conducted in foreign currency, in a fresh bid to buttress the flagging lira.

The bank's Monetary Policy Committee raised the one-week repo rate to 24 percent, meaning it has now increased interest rates by 11.25 percentage points since late April in an attempt to put a floor under the tumbling currency.

The surprise move by the bank comes as Turkey has been battling through one of the most troubled periods for its economy under the rule of President Recep Tayyip Erdogan, which saw runaway inflation and the Turkish lira battered on currency markets in August.

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

"Accordingly, the Committee has chose to implement a strong monetary tightening to support price stability", the monetary policy committee statement said.

The lira rallied 3 percent to 6.18 against the dollar, having traded at 6.4176 beforehand.

A "tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement", it added.

It stood at 6.4550 against the dollar at 1012 GMT, weakening sharply from Wednesday's close after Erdogan said high inflation was a result of the central bank's wrong steps.

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He had previously served several prison sentences for crimes including arson and assault, the Beijing Youth Daily said. Initially the government said three people died, but raised the death toll to nine in a statement late on Wednesday.

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 bank´s intervention was the latest aggressive rate hike to calm economic turbulence in an emerging market after the Argentinian central bank´s recent hike from 45 to 60 percent on August 30.

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

He earlier charged the bank with failing to control inflation and again aired his unorthodox view that low rates bring inflation down. Erdoğan has always been pressuring the bank to keep interest rates low to encourage economic growth. "If you say "inflation is the cause, the rate is the result", you do not know this business, friend", he added.

The central bank said it was returning to funding via one-week repos from Friday, having funded the market at an overnight lending rate of 19.25 percent for the last month.

However, a diplomatic row with the United States and concerns about the president's influence on monetary policy have eroded investor confidence in Turkey in recent months.

Erdogan, a self-described "enemy of interest rates", assumed new powers under an executive presidential system following an election in June and has appointed his son-in-law as finance minister.

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.

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