Published: Thu, September 13, 2018
Markets | By Otis Pena

Turkish central bank raises rates sharply, boosts lira

Turkish central bank raises rates sharply, boosts lira

"It nearly seems like it's a game of "good cop, bad cop" being played out between the Turkish authorities - with President Erdogan on the one hand still making statements regarding his dislike of interest rates and. a very sizeable reaction from the central bank in response to the recent inflationary and geopolitical developments", she said.

The lira reacted strongly to the rate rise, initially up 5% in value to 6.0 lira to the United States dollar, later settling up more than 2.7% at 6.15 to the dollar.

The Turkish lira began to recover shortly after the rate hike, strengthening by 3% to 6.16 against the dollar.

But just hours before the CBRT decision, president Erdogan had dubbed interest rates as a "tool of exploitation", with the lira sliding further.

In a decision announced earlier on Thursday, he ruled that property sales and rental agreements must be made in lira, putting an end to such deals in foreign currencies.

In a statement, the bank's Monetary Policy Committee said the policy rate was increased to 24 percent, up from 17.75 percent.

Since then, he has continued to dismiss calls to raise rates to address Turkey's longtime woes with its currency, the lira.

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

TRT World's Turkey analyst Yusuf Erim has more.

Microsoft Edge warns Windows 10 users to avoid Chrome and Firefox
Spotted by Windows Central , Windows 10 Insiders are now seeing an Edge "ad" when trying to install Chrome or Firefox. The warnings appear on Windows 10 and remind people they already have Microsoft's Edge browser installed.


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.

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.

The rate hit the lowest level in two weeks.

The bank has now increased interest rates by 11.25 percentage points since late April, in an attempt to put a floor under the tumbling lira. "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.

In a speech to a traders' confederation in the capital, Ankara, Mr Erdogan said on Thursday that nobody should carry out business in foreign currency apart from exporters and importers.

Its monetary committee chose to "implement strong monetary tightening to support price stability", it said on Thursday, as it raised interest rates by 625 basis points in the face of a spike in inflation and a slump in the lira.

He's delivered on that pledge, ousting the old guard of policy makers who'd guided the economy since 2002 and giving himself the sole authority to make appointments at the central bank and other state organizations.

Like this: