Turkey More Than Doubles Interest Rate in Emergency Move to Bolster Lira

Posted by Bloomberg

Share on Facebook

Tweet on Twitter

Turkey’s central bank raised all its main interest rates at an emergency meeting, resisting political pressure and reversing years of policy, after the lira slid to a record low.

The bank in Ankara raised the benchmark one-week repo rate to 10 percent from 4.5 percent, according to a statement posted on its website at midnight. It also raised the overnight lending rate to 12 percent from 7.75 percent, and the overnight borrowing rate to 8 percent from 3.5 percent. The lira extended gains after the announcement, adding 3 percent to 2.18 per dollar at 1 a.m. in Istanbul.

The bank also said that investors should now treat the repo rate as the main indicator, instead of the lending rate. That makes today’s move an effective tightening of between 200 basis points and 400 basis points, according to Neil Shearing at Capital Economics in London.

The bank’s governor, Erdem Basci, is fighting to arrest a currency run that has gained speed as domestic political tensions overlap with global market shifts. He’s also run into pressure from Prime Minister Recep Tayyip Erdogan and his government to keep rates low to bolster growth.

….read more HERE