Published: Sun, September 16, 2018
Money | By Armando Alvarado

Turkey raises interest rates to 24% in new bid to boost lira

Turkey raises interest rates to 24% in new bid to boost lira

Recent currency fluctuations in Turkey have political reasons, President Recep Tayyip Erdoğan said Friday, describing the surge in USA dollar/Turkish lira rate in August as an "evidence of an attempted economic assassination".

All agreements that are either priced in or indexed to foreign currencies will have to be amended within 30 days, though some will be exempt, according to the decree.

The leader placed his son-in-law as head of the finance ministry and in a separate move has attempted to take control of the country's sovereign wealth fund.

Commenting on Thursday's 625 basis point interest rate rise, announced just two hours after Erdoğan reiterated his opposition to high rates, the president said it proved the central bank was independent, while repeating his own skepticism.

The lira rose after the decision and was trading 3.1 per cent higher at 6.1604 per dollar at 2:23 p.m.in Istanbul.

The depreciation has fuelled higher import costs, contributing to an inflation rate that is more than three times the central bank's target, and many investors are calling for a large increase in borrowing costs to put an end to the rout. Credibility of the Turkish central bank has already been damaged and therefore the markets still need to see strong proof that the CBRT can act independently from Erdogan. The Turkish strongman is an avowed enemy of high-interest rates, which he considers a detriment to economic growth. "If you say 'inflation is cause, the rate is the result", you do not know this business, friend, ' he added.

There is also alarm over the direction of monetary policy under Erdogan who has railed against interest rates as "the mother and father of all evil".

"My sensitivities concerning interest rates are the same, nothing has changed", Erdogan said.

Confirmed Dead Due to Hurricane Florence
The rising sea crept towards the two-storey home of Tom Copeland, who lives on a spit of land surrounded by water in Swansboro. A gust of 169km/h was recorded at Wilmington airport, surpassing the power of Hurricane Fran two decades ago.

Relations with the USA deteriorated last month after Washington imposed sanctions on two Turkish ministers over the detention of an American pastor and President Donald Trump doubled steel and aluminium tariffs on Turkey.

The bank must balance concerns over slipping growth, which, although a robust 5.2 percent in the second quarter on an annual comparison, showed signs of weakness with some analysts predicting Turkey is heading for recession.

Erdogan has cast the lira crisis as an "economic war" targeting Turkey and has repeatedly urged Turks to sell their dollar savings to shore up the lira.

"We are not considering any fresh investments right now", Erdogan said in a speech on Friday.

"For any property transaction it's the price at the moment of the deal that counts".

"Ultimately, I think if you're buying long-term in Turkey, it shouldn't really be an issue".

In August, because the lirsa became once selling off, the president known as on Turks to sell their bucks for liras as part of a "national fight", blaming the mounting disaster on "financial warfare" by the USA and others in resolution to on his own policies.

Like this: