Turkey central bank hikes rates to 24%

13 September, 2018, 17:53 | Author: Eric Barnett
  • USD  TRY exchange rate at two-week low

Erdogan, a self-styled "an enemy of interest rates", 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.

President Recep Tayyip Erdogan has appointed himself chairman of Turkey's multi-billion-dollar sovereign wealth fund, according to a decision published Wednesday in the Official Gazette.

Central bank policymakers meet later on Thursday and are expected to raise interest rates - which are now less than inflation - to support the lira.

"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.

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

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


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

He earlier charged the bank with failing to control inflation and again aired his unorthodox view that low rates bring inflation down.

"The central bank is independent and makes its own decisions", he said.

Before today's interest rate decision, Mr Erdogan announced he was banning the use of foreign currencies in property sales, rental contracts and leasing transactions and ruled all such transactions must now be made in lira.

The monetary policy committee of the bank said the one-week repo rate was being lifted to 24% from 17.75%, the first rate hike since June. "If you say "inflation is cause, the rate is the result", you do not know this business, friend", he added. Berat Albayrak, his son-in-law and treasury minister, will be his deputy and the fund's management staff have all been replaced.

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.

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