Turkey boosts lira as central bank surprises markets with big rate hike

Turkey boosts lira as central bank surprises markets with big rate hike

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.

The bank is expected to raise interest rates on September 13.

The bank said on Thursday that inflation developments pointed "to significant risks to price stability" due to the recent fall in value of the lira.

The magnitude of the hike was all the more surprising given that just before the decision Erdogan had slammed interest rates as a "tool of exploitation".

Thursday's decree, which was published in the government's official gazette, says all current agreements in the property sector made in foreign currencies must be changed within 30 days.

Earlier on Thursday, President Recep Tayyip Erdoğan said his sensitivity regarding high interest rates remained the same, but added that the Central Bank was independent in its decisions.

"Hemati told the media a meeting with the administrators of the Turkish and Russian Central Banks is expected in the near future and he hopes the agreed topics would rapidly come into effect", the Turkish agency said.

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

The lira has lost roughly 40 percent of its value against the US dollar this year, and its inflation rate sits at about 18 percent. Late last month, South America's second-largest economy saw that rate jump to a staggering 60 percent in a bid to ease investor fears.

More news: Stewart, Storm surge past Mystics for WNBA title
More news: Rashford ahead of Kane and Cristiano, says Southgate
More news: Ericsson Signs $3.5 Billion 5G Agreement With T

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

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

"Erdogan's comments clearly show that he does not support this and it becomes much more hard, if not impossible, for the Turkish central bank to tighten enough to stabilize the lira and get inflation under control", Esther Reichelt, a forex strategist at Commerzbank in Frankfurt, told DW.

Currently, the interest rates are below the annual inflation level in Turkey. And on the morning of the rate hike decision, Erdogan was busy.

The bank implemented what economists described as a hidden interest rate hike in mid-August, forcing banks to borrow at the higher 19.25 per cent through the overnight lending facility.

Turkey's currency crisis has been driven by concerns about Erdogan's influence on monetary policy, but also more recently by the country's diplomatic row with the United States.

As well as being seen to undermine the independence of the central bank, Erdogan in July stunned markets by appointing his son-in-law Berat Albayrak as finance minister.

A growing crisis became acute earlier this year following the detention of an American pastor on espionage and terror-related charges, which prompted Donal Trump to double the import tariffs on Turkish steel and aluminium.

Related Articles

  • Amazon’s Bezos unveils $2 billion philanthropic fund

    Amazon’s Bezos unveils $2 billion philanthropic fund

    Bezos, who founded Amazon as an online book store more than two decades ago, has seen his wealth surge along with Amazon's stock. This year, Gates also announced it was taking up systemic poverty in the U.S.
    The Last Remnant Remastered Announced For PlayStation 4

    The Last Remnant Remastered Announced For PlayStation 4

    The remastered version of the Square Enix JRPG will be releasing on PS4 worldwide on December 6, 2018. No word yet about an global release.
    The New $1,449 iPhone Won't Include A Free Headphone Dongle

    The New $1,449 iPhone Won't Include A Free Headphone Dongle

    It is worth noting that Apple has reportedly discontinued select handsets including iPhone X , iPhone 6S and iPhone SE in the US. The A12 Bionic is faster and more efficient than before and packs Apple's own GPU as well as an improved neural engine.
  • Conservative lawmakers discuss ousting British PM May

    Conservative lawmakers discuss ousting British PM May

    They have also said there is no need to leave without a deal and have accused opponents of Brexit of scare-mongering. The rift deepened this week with Johnson comparing May's plan to a "suicide vest" on Britain's constitution.
    1.5m to evacuate as Hurricane Florence approaches US

    1.5m to evacuate as Hurricane Florence approaches US

    Forecasts generally project Florence to make landfall in southeastern North Carolina on Friday as a Category 3 or 4 hurricane. The storm was about 235 miles east-southeast of Wilmington, North Carolina and was moving at about 17 mph on Thursday.

    What is monkeypox? Second person diagnosed with deadly virus

    There have however been more major outbreaks, with the most recent just over a year ago in The Democratic Republic of Congo (DRC). He has travelled to Nigeria recently from where he could have contracted the infection says the Public Health England .
  • Real Madrid enter the race for De Jong

    Real Madrid enter the race for De Jong

    Reports also claim that Tottenham made a bigger offer for De Jong, though those overtures were also rejected. Therefore, Barcelona could sign him in January and use him in the Champions League.

    FDA Gets Tough on Juul, Other E-Cigarette Makers

    But it added that "appropriate flavors play an important role in helping adult smokers switch", spokeswoman Victoria Davis said. Studies show that teens who vape are also more likely to go on to smoke traditional burned cigarettes.

    Apple iPhone Xs vs iPhone X: Here's what is different

    Apple on Wednesday announced that they had stopped selling the iPhone 6 series and Android users won't let iPhone lovers be. The price for the iPhone XS starts at $999 for the 64 GB model and goes up from there for 256 GB and 512 GB.
  • Hurricane Florence's winds start to rake North Carolina coast

    Hurricane Florence's winds start to rake North Carolina coast

    Boarding up his home in Myrtle Beach, South Carolina , Chris Pennington watched the forecasts and tried to decide when to leave. North Carolina alone could get from 20 to 30 inches, with isolated spots possibly receiving 40 inches.
    Pope Francis Orders Investigation Of US Bishop After Church Leaders Meet

    Pope Francis Orders Investigation Of US Bishop After Church Leaders Meet

    In their conclusions, the German researchers said there was evidence that some church files were manipulated or destroyed. A diocesan statement also referred to allegations the priest , Manuel La Rosa-Lopez, abused a 16-year-old girl in 2001.
    Georgia Gov. Deal declares state of emergency ahead of Hurricane Florence

    Georgia Gov. Deal declares state of emergency ahead of Hurricane Florence

    Unsure of what they might find when they return home, the couple went shopping for a recreational vehicle. "We're able", he said. So we could have two landfalls - one around Wilmington and then one near Myrtle Beach or even south of there.