Turkey’s Central Bank hikes interest rates unexpectedly, bumping up lira from record low

Duvar English – Reuters

Turkey’s lira charged higher against the dollar on Sept. 24 as a result of the central bank’s surprise move to raise its policy rate, proving economists wrong in expecting a continuation of back-door tightening measures.

After hitting a series of record lows, the lira climbed 1% as the central bank said a fast recovery from the initial coronavirus pandemic shock sent inflation higher than expected, prompting it to hike interest rates by 200 basis points after nearly a year of aggressive rate cuts.

“Massive surprise, and positive. Suggests the [central bank] listened to the market and decided they had to move to avoid a disorderly devaluation and potential balance of payments crisis,” said Tim Ash at BlueBay Asset Management.

“They are not out of the woods yet, but they have given themselves a fighting chance.”

Despite a recent Moody’s credit rating downgrade, the Central Bank’s Monetary Policy Committee (PPK) said that the Turkish economy was thriving in the third quarter of the year, as Ankara’s interventions sustained production.

However, the PPK will maintain a “cautious approach,” the official statement said, as it’s vital for inflation rates to lower in coming months.

The lira has lost over 20% versus the dollar this year, making it one of the worst performing currencies due to worries about Turkey’s depleted forex reserves and sharply negative real interest rates.

The lira was also supported by easing tensions over sanctions from the European Union after Ankara agreed to talks with Greece over maritime claims, although a date for discussions had not been decided yet.

from Duvar English https://ift.tt/33ZNpno

About CHP EU Representation

The CHP was founded on 9 September 1923, about one and half month before the proclamation of the Republic of Turkey. The first President of modern Turkey’s oldest party was M. Kemal Atatürk. Today CHP is a social-democratic party, member of the Socialist International and associate member of the Socialist Group at the European Parliament. The scope of the CHP bureau in Brussels is not limited to the bilateral framework of Turkey's EU accession process. Issues such as the information society, energy policies, social development, climate change, international trade and security are among the different focus areas. The EU-Turkey relations are about integration and need multiple, plural and horizontal channels of communication. The CHP supports and promotes Turkey's EU membership process also by being more present and active in Brussels The CHP's Representative to the EU is Ms Kader Sevinç who previously worked as an MEP advisor at the European Parliament and in the private sector.
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