Turkish lira appreciated by more than 5% country’s central bank raised interest rates

September 13, 2018 1:35 pmComments Off on Turkish lira appreciated by more than 5% country’s central bank raised interest ratesViews: 95

Turkish liraThe Turkish lira appreciated by more than 5% after the country’s central bank raised interest rates despite Turkish President Recep Tayyip Erdogan’s call to do the opposite to reduce credit costs. The currency offset an earlier decline after central bankers raised their key seven-day repo rate by 625 basis points to 24%.

Earlier in the day, Erdogan criticized bankers for causing a depreciation of the currency.

“The central bank is independent and makes its own decisions”, said Recep Tayyip Erdogan, while criticizing the bank for “never succeeding in meeting its inflation targets”.

He criticized private banks, saying some of them raised interest rates to 50%. “My sensitivity to interest rates is the same, and that’s not a crisis, it’s a manipulation, do not be mistaken, that’s going to be overcome”, added the Turkish President.

Recep Tayyip Erdogan, who defines himself as an “enemy of the interest”, wishes to keep the interest rates low in order to keep the boom of economic growth fueled by lending.

The Turkish Central Bank earlier signaled that its monetary policy would be adjusted in an effort to support the Turkish lira. The reason for this was the reported record inflation of nearly 18%.

The interest rate decision was eagerly awaited. The experts have long advocated such a solution in order to stem the high inflation and the fall of the lira. Since the beginning of the year, the Turkish currency has lost more than 40% of its value against the Euro. For many Turkish citizens and companies with debts in Western currencies this is a huge problem. Returning loans is becoming more and more expensive.

The President Recep Tayyip Erdogan, who, according to observers, exercises ever more influence over the independent central bank, is opposed to rising interest rates, and even calls for them to be reduced. The recovery of the currency is actually in his interest, but Erdogan fears that rising interest rates can stifle the economy.

Meanwhile, Turkish Finance Minister Berat Albayrak said earlier this month in an interview that the Turkish Central Bank has independent government and will take all necessary measures to fight inflation.

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