Turkey has means to curtail currency shifts: President

Turkey has means to curtail currency shifts: President

Turkey has means to curtail currency shifts: President

The bank's move came after the USA dollar/Turkish lira exchange rate hit a historic high on Wednesday, climbing to around 4.93.

Turkish lira bounced back from historic low 4.90 to 4.55 against the US dollar after the Central Bank raised benchmark lending rate from 13,5% to 16,5% following an emergency meeting on Wednesday to prevent a full-scale currency crisis.

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

"Turkey's economy grew 7.4 percent previous year and is still maintaining a growth trend at this level".

"Comments from the Turkish president raise the possibility that discretionary policymaking and policy predictability will come under pressure after June's elections", Fitch stated, referring to President Recep Tayyip Erdoğan's eyebrow-raising remarks in London last week.

"It's high time to restore monetary policy credibility & regain investor confidence", Deputy Prime Minister Mehmet Simsek, Turkey's top economy official in cabinet, said on Twitter after Wednesday's central-bank meeting. This deepened worries about the ability of the central bank's Monetary Policy Committee to tame double-digit inflation.

The crisis emerged after the Turkish President said he planned to take more control of the country's finances after a general election on 24 June.

Turkey's currency lira has fallen to an all-time low against the USA dollar amid fears of economic instability as the country heads toward crucial elections next month.

Turkey has means to curtail currency shifts: President

The 300 basis points hike was largely in line with what economists said was needed and, in a hawkish statement, the central bank said it would continue to use "all instruments" to achieve price stability.

Its performance has been even worse than the Argentinian peso which has also suffered severe turbulence over the last month.

"At long last. If they had listened to the markets weeks ago and done this back then they may have been able to get away with a lower rate hike", said Timothy Ash, emerging markets debt strategist at BlueBay Asset Management.

"Interest rates are the mother and father of all evil", said Erdogan, mentioning also a "foreign conspiracy" to harm Turkey's economy ahead of elections.

A similar measure was taken Wednesday morning by the Istanbul Stock Exchange which made a decision to convert all foreign exchange asset needs to lira "in order to fight speculative actions aimed at creating negative image of Turkey before the elections".

An AFP photographer in Istanbul's Grand Bazaar said currency traders were refusing to sell dollars to limit their own losses amid the currency slide.

Many investors want to see a rise in interest rates to bring down inflation, which is in double figures.

The Turkey ETF was trading with a volume of 2.5 million shares late Wednesday, compared to its average daily volume of 314,000, according to Morningstar data. "But the relief has often proved short-lived", he said.

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