Turkish central bank mulls policy changes amid currency drop

AP , Thursday 13 Sep 2018

File Photo:Turkey's Central Bank (TCMB) logo is pictured at the entrance of the bank's headquarters in Ankara

Turkish President Recep Tayyip Erdogan on Thursday reiterated his opposition to interest rate hikes as the central bank was set to discuss possible changes to its monetary policy amid broad concerns over the weakening currency.

The bank said earlier this month that it would adjust its monetary policy, raising hopes amid economists that it will increase interest rates on Thursday.

Independent experts say Turkey should increase rates to help stem the selling pressure on the currency, as higher returns would entice international investors. The bank has, however, come under pressure from Erdogan to keep interest rates low to encourage economic growth.

Addressing a meeting of Turkish tradesmen and artisans in Ankara, Erdogan said the central bank is independent and takes its own decisions. He repeated however, 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 said. "I'm saying let's cut these high interest rates."

Erdogan again portrayed the currency crisis as a foreign conspiracy saying: "This is not a crisis, it is a manipulation. Don't allow to be fooled, we will overcome it."

The Turkish lira weakened by 3 percent against the dollar following Erdogan's speech, trading at 6.53 per dollar.

The currency has plunged some 40 percent against the dollar this year over concerns 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 annual inflation has jumped to nearly 18 percent while economic growth has slowed to an annual rate of 5.2 percent in the second quarter, from the first quarter's 7.4 percent.

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.

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