Erdogan says his patience on central bank policy has limits

Andrew Cummings
September 16, 2018

On Thursday the Turkish Central Bank raised its one-week repo rate by 625 base points, from 17.75 percent to 24 percent.

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. Financial markets have grown increasingly concerned that Turkey is in danger of adding its name to the list of countries seeking a rescue loan from the International Monetary Fund.

The decision also covers contracts for business and services.

The lira tumbled after President Recep Tayyip Erdogan said Turkey should cut interest rates just hours before the central bank is due to review policy.

Inflation is another intractable problem and it soared this month to a 15-year high of nearly 18 percent.

"We need to gradually end the monopoly of the dollar once and for all by using local and national currency among us", he said.

Investors have focused their concerns on Ankara following Erdoğan's re-election and his grab for control of the country's economy.

There may be exceptions decided by the treasury and finance ministry - headed since July by Erdogan's son-in-law and former energy minister, Berat Albayrak - the decree added.

Washington is pressing Turkey to release a detained American pastor.

Newsmen report that on August 11, Erdogan accused the US of waging economic "war" on Turkey amid a downturn that has seen the currency plunge.

Turkish economic growth slowed to 5.2 percent year-on-year in the second quarter, data showed on Monday, in what officials described as an economic rebalancing before an expected second-half slowdown as Turkey grapples with a currency crisis. Subsequently, the lira lost some 25 percent of its value while Turkish authorities have taken a series of steps created to support the currency, with the central bank taking liquidity measures and the banking watchdog limiting derivative transactions.

Erdogan has called for low rates since, claiming high interest rates were "evil", referring to them as "tools of exploitation".

Analysts say Turkey needs to raise interest rates to combat inflation, which is running at 16%.

With this interest rate hike, Turkey has become the third country with the highest political interest rates after Argentina and Suriname.

He criticised the central bank, saying it had consistently miscalculated inflation targets and again portrayed the currency crisis as a foreign conspiracy.

The central bank said in its statement that there was still an upside risk to Turkey's inflation outlook from what it called a deterioration in pricing behavior, despite weaker domestic demand conditions. 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.

Other reports by iNewsToday