pcloudy.png
Sunday May 19th, 2019 12:51PM

Turkish central bank raises rates to stem currency crisis

By The Associated Press
Related Articles
  Contact Editor

ANKARA, Turkey (AP) — Turkey's central bank on Thursday raised its key interest rate sharply, from 17.75 percent to 24 percent, to contain inflation and stem the currency crisis that has been destabilizing the country this summer.

The bank's move is long overdue, many independent economists say, and suggests it is re-asserting its independence after President Recep Tayyip Erdogan repeatedly and publicly pushed it to keep rates low.

The Turkish lira began to recover shortly after the rate hike, strengthening by 3.4 percent to 6.18 against the dollar.

The currency has plunged in recent months and even after Thursday's rise was down almost 39 percent against the dollar this year. Investors are mainly concerned about Erdogan's economic policies and an ongoing diplomatic and trade dispute with the United States over the detention of an American pastor on espionage and terror-related charges. Washington imposed sanctions on two government ministers and doubled tariffs on steel and aluminum imports from Turkey.

Turkey's woes are also part of wider jitters in developing countries as investors pull their money out of the fast-growing — but often fragile — emerging economies to return it to safer markets like the U.S.

In a statement, the central bank noted Thursday that the local economy is weakening and inflation is rising. The rate hike could pinch growth more, but experts say it's needed to contain inflation of around 18 percent and support the currency. The central bank said it would keep high rates until inflation eases.

Istanbul-based economist Ozlem Derici Sengul said investors were worried about the central bank not being able to take such action due to political pressure, so "the move built credibility."

But analysts say the move will not be enough to quickly erase international investors' concerns, as the country has fundamental economic problems, such as a high level of debt owed in foreign currencies that has grown in size as the lira has fallen.

And they say Erdogan remains unpredictable in his policies since he was re-elected this year as president with vastly expanded powers.

Erdogan has long been pressuring the central bank to keep interest rates low to encourage economic growth, even though that growth has encouraged reckless borrowing and caused consumer prices to spike higher. Economic growth slowed to an annual rate of 5.2 percent in the second quarter, from the first quarter's 7.4 percent.

"The next thing to watch will be the reaction of President Erdogan," said Jason Tuvey, senior emerging markets economist at Capital Economics. "Any sign that he will try to reassert his influence over monetary policy decisions could quickly cause market sentiment to deteriorate again."

Just two hours before the central bank's announcement, Erdogan repeated his belief that interest rates should be cut, calling them an "instrument for exploitation."

"My sensitivities concerning interest rates are the same, nothing has changed," Erdogan told a meeting of Turkish tradesmen and artisans in Ankara. "I'm saying: 'Let's cut these high interest rates.'"

While acknowledging that the central bank is independent, he also criticized it, saying it had consistently miscalculated inflation targets, and he portrayed the currency crisis as a foreign conspiracy.

In a bid to shore up the Turkish lira, Erdogan's government issued a decree on Thursday banning the use of foreign currency in the sale and renting of property and the leasing of vehicles.

According to the decree, all sales and rental contracts agreed in foreign currency will be converted to Turkish lira.

__

Neyran Elden and Mehmet Guzel in Istanbul contributed.

  • Associated Categories: Associated Press (AP), AP World News, AP Business, AP World News - International incidents, AP Business - Economy, AP Business - Financial Markets, AP Business - Industries, AP Business - Financial Services
© Copyright 2019 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Spy poison case: Suspects say they were in UK as tourists
The two Russian men who have been charged in Britain with poisoning a former Russian spy say they have visited Britain as tourists
7:39AM ( 17 minutes ago )
Eurovision says Tel Aviv will host 2019 song contest
Eurovision Song Contest has announced that next year's competition will be held in Tel Aviv
7:39AM ( 17 minutes ago )
Community to memorialize St. Lucia man killed by Dallas cop
A funeral is scheduled Thursday for a black man killed in his home by a Dallas police officer who says she mistook his residence for her own
7:31AM ( 25 minutes ago )
Associated Press (AP)
The Latest: Vatican authorizes investigation of US bishop
The Vatican has authorized an investigation into a U.S. bishop accused of sexual harassment of adults,
6:55AM ( 1 hour ago )
Former UN chief Kofi Annan to be buried after state funeral
Former United Nations Secretary-General Kofi Annan will be buried Thursday after a three-day funeral and ceremony
6:50AM ( 1 hour ago )
Iranians attend funeral for soldiers killed in Iran-Iraq war
Thousands of Iranians attend massive funeral for 135 soldiers, 30 years after the end of the 1980s war between Iran and Iraq
6:47AM ( 1 hour ago )
AP World News
World stocks rise on report of US-China trade talks
World stocks are climbing on a report that the U.S. has proposed a new round of trade negotiations with China before going ahead with plans to slap tariffs on $200 billion or more in Chinese goods
5:19AM ( 2 hours ago )
WHAT'S HAPPENING: Hurricane Florence looms over East Coast
Hurricane Florence is being called a once-in-a-lifetime storm for threatening to cause historic flooding, blow catastrophic winds and idle for days over the Carolinas and the Mid-Atlantic
5:17AM ( 2 hours ago )
China says Washington asks to resume talks on tariff fight
China says Washington has asked to resume negotiations on their worsening tariff dispute
5:10AM ( 2 hours ago )
AP Business
Survey: US companies in China hurt by tariff war
Survey: Two-thirds of US companies in China hurt by tariff war
1:14AM ( 6 hours ago )
US stocks wobble as trade hopes flicker and tech stocks slip
After a short-lived rally, US stocks finish mixed as energy companies climb along with oil prices and technology companies skid
4:38PM ( 15 hours ago )
Trump poised to tax an additional $200B in Chinese imports
US is poised to tax an additional $200 billion in Chinese imports, escalating dispute with Beijing
6:02AM ( 1 week ago )
AP World News - International incidents
Asian stocks rise on possible US-China talks amid tensions
Asian markets are mostly higher as a report that the U.S. had proposed a new round of trade negotiations with China boosted sentiment
2:36AM ( 5 hours ago )
Bank of England set to hold rates amid Brexit uncertainty
The Bank of England is set to keep interest rates on hold Thursday and will likely indicate that they won't be raised again until the uncertainty surrounding Brexit has been resolved.
2:22AM ( 5 hours ago )
European Central Bank to take next step in tapering stimulus
The European Central Bank is phasing out its extraordinary stimulus efforts left over from the Great Recession and the eurozone debt crisis _ but doing it so gradually and predictably that markets are looking ahead to Thursday's meeting as no big deal
1:04AM ( 6 hours ago )
AP Business - Economy
Da Silva's candidate vows to be his own man in Brazil
In his first full day as the presidential candidate for Brazil's Workers' Party, Fernando Haddad pledged to be his own man if elected and not bow to financial markets or the interests of other countries, including the United States
8:21PM ( 11 hours ago )
Stocks are mixed as tech weakness cancels out energy gains
After a short-lived rally, US stocks are little changed overall as energy companies climb along with oil prices and technology companies skid
1:59PM ( 17 hours ago )
US stocks are little changed; energy prices climb further
US stocks are little changed as energy companies and oil prices rise for a second day but technology companies head lower
10:21AM ( 21 hours ago )
AP Business - Financial Markets
The Latest: Florence weakens slightly, remains Category 3
Forecasters say Hurricane Florence has slightly weakened but remains a potentially catastrophic Category 3 storm as it continues toward North and South Carolina
11:59PM ( 7 hours ago )
Strongest typhoon this year closes in on north Philippines
The most powerful typhoon of the season is closing in on the northern Philippines, where officials ordered precautionary evacuations and closures of schools and offices and urged farmers to quickly harvest their crops to reduce damage
10:53PM ( 9 hours ago )
New Zealand dairy giant posts loss after China stake sours
New Zealand's largest company, which sells dairy products, says it will completely review its business after a disastrous financial year saw it post its first-ever loss
9:51PM ( 10 hours ago )
AP Business - Industries
To prep for Hurricane Florence, investors sell off insurers
Ahead of Hurricane Florence, a frenzied sale of property insurers, investments in companies that sell construction supplies, portable generators
5:24PM ( 1 day ago )
AP Exclusive: Stable costs may shift 'Obamacare' politics
AP Exclusive: Fortunes flip for Affordable Care Act with modest premium rise and some insurers returning
4:54PM ( 5 days ago )
US stock indexes churn as investors gird for higher rates
U.S. stock indexes churned in early trading Friday, with high-dividend stocks falling and tech stocks rising, after a surprisingly strong jobs report pushed investors to gird for higher interest rates
11:46AM ( 5 days ago )
AP Business - Financial Services
Spy poison case: Suspects say they were in UK as tourists
The two Russian men who have been charged in Britain with poisoning a former Russian spy say they have visited Britain as tourists
7:39AM ( 17 minutes ago )
Eurovision says Tel Aviv will host 2019 song contest
Eurovision Song Contest has announced that next year's competition will be held in Tel Aviv
7:39AM ( 17 minutes ago )
Community to memorialize St. Lucia man killed by Dallas cop
A funeral is scheduled Thursday for a black man killed in his home by a Dallas police officer who says she mistook his residence for her own
7:31AM ( 26 minutes ago )
Pope OKs probe into US bishop over sex harassment claims
A delegation of U.S. Catholic cardinals and bishops met Thursday with Pope Francis as a new bombshell dropped in the Catholic Church's long-running sex abuse and cover-up scandal
7:27AM ( 30 minutes ago )
Bank of England holds rates as it awaits Brexit developments
The Bank of England has kept its main interest rate on hold at 0.75 percent as policymakers await developments in Britain's looming exit from the European Union.
7:18AM ( 39 minutes ago )