Turkey raises interest rates to 24% in startling bid to curb inflation

Turkey raises interest rates to 24% in startling bid to curb inflation

With Thursday's decision, the ECB's rate on bank overnight deposits, which is now its primary interest rate tool, remains at -0.40 percent. It later shed some of those gains but was still up 3.0 per cent in value at 6.14 to the dollar.

It said: "Accordingly, the committee has made a decision to implement a strong monetary tightening to support price stability".

"Turkey's Wealth Fund has appointed President Recep Tayyip Erdogan as its new chairman, according to a notification in the Official Gazette", state news agency Anadolu said.

It described the hike as a "strong monetary tightening to support price stability".

Mr Erdogan, who has called himself an "enemy of interest rates", chose his son-in-law, Berat Albayrak, as finance minister in July.

"Hiking today does get Turkey on the slow road to recovering some monetary policy credibility, and that is critical".

The lira had lost 40 percent of its value against the dollar this year, hit by concerns about monetary policy and, more recently, a diplomatic spat between Turkey and the United States.

Key rates are now at their highest level since 2004, around a year after Erdogan first came to power.

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The central bank said it was returning to funding via one-week repos from Friday, having funded the market at an overnight lending rate of 19.25 per cent for the last month. "There has been no change in my sensitivities on the issue of interest rates".

The bank said on Thursday that inflation developments pointed "to significant risks to price stability" due to the recent fall in value of the lira.

There had been indications from the bank that it would raise rates after inflation came in at almost 18 per cent in August, according to official data last week.

The lira had weakened earlier on Thursday before the central bank decision as Erdogan's fierce criticism of the central bank and high interest raised doubts in investors' minds about how much the bank might tighten policy.

Neil Wilson, chief market analyst at Markets.com said: "This was a definite statement from policymakers, but the risk now is that the market tries to test the central bank's resolve: the horse may have already bolted".

The bank´s intervention was the latest aggressive rate hike to calm economic turbulence in an emerging market after the Argentinian central bank´s recent hike from 45 to 60 percent on August 30.

"The Governing Council expects the key European Central Bank interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary", it said, repeating its guidance.

In another bid to prop up the lira, Erdogan earlier on Thursday ordered by decree that property agreements in foreign currencies would not be allowed.

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