Turkey boosts lira as central bank surprises markets with big rate hike

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It has still lost 38 per cent of its value against the US currency this year. "This is the first time in recent memory that Turkey has delivered a hawkish surprise".

"They act according to the Central Bank's decisions and there are now rates as high as 50 percent in practice", Erdoğan said, underlining that such sharp profits could only be gained through narcotics. In the other direction, with the economy heading into recession, lower rates would help inject growth stimuli.

Turkey's central bank raised its benchmark rate by a hefty 625 basis points on Thursday, the biggest such increase in President Tayyip Erdogan's 15-year rule, boosting the lira and possibly easing investor concern over his influence on monetary policy.

Erdogan previous year said the fund needed a "reorganisation" after the first chairman Mehmet Bostan was removed from his post in September 2017.

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Erdogan again described interest rates as a "tool of exploitation" but vowed that "we can not be taken advantage of".

The revamp was the latest in a series of steps Erdogan has taken to assume new powers since he won a presidential election in June, heralding the move to an executive presidency which grants sweeping authority. "How can the private sector invest in such high interest rates?" he asked, adding that such margins were only made by drugs dealers.

Currently, the interest rates are below the annual inflation level in Turkey. "If you say "inflation is the cause, the rate is the result", you do not know this business, friend", he added.

"As of today, I have not seen the central bank fix inflation rates as they promised", Erdogan went on. In fact, he calls himself the "enemy of interest rates", and was even pushing for lower rates as recently as Thursday morning.

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At a Tehran summit on Friday with his Iranian and Russian counterparts, an agreement was reached to use local currencies for trade deals, Anadolu reported, citing Iran's central bank governor Abdolnaser Hemati.

The lira has lost 40 percent of its value against the USA dollar this year over concerns about Mr Erdogan's influence and a diplomatic spat between Ankara and Washington but firmed to 6.01 following the interest rate decision, from more than 6.4176 beforehand. Inflation also soared this month to a 15-year high of nearly 18%.

Turkey's currency and inflationary troubles are also compounded by the threat of steel and aluminium tariffs from the United States as well as sanctions over the detention of an American evangelical pastor.

Erdogan has cast the lira crisis as an "economic war" targeting Turkey, repeatedly urging Turks to sell their dollar savings to shore up the lira.

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"Against this background, the lira's reaction is still surprisingly limited in my opinion".

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