Turkey’s Central Bank Undoes Tightening, Lowers Rate to 24%

Turkey’s Central Bank Undoes Tightening, Lowers Rate to 24%

© Reuters. Turkey’s Central Bank Undoes Tightening, Lowers Rate to 24%

(Bloomberg) — Turkey’s central bank effectively lowered its main interest rate by 150 basis points, undoing a limited tightening of policy it delivered about two weeks ago to support the lira.

The bank offered funds at 24% through the repo auction, compared with the overnight rate of 25.5%. It announced the suspension of its one-week repo auctions on May 9, ceasing to provide liquidity to lenders at its cheapest rate.

Turkey had no need for monetary loosening at this stage, according to Inan Demir, an economist at Nomura Plc in London. “The pace of domestic economic activity may argue for easier monetary conditions but clearly the FX market stress is too big to allow that,” he said.

The Turkish currency was little changed after the decision, having already weakened as much as 0.9% earlier on Tuesday when the central bank cut the rate on one-week lira swaps to 24%, a sign it was going to ease policy.

Turkish authorities have rolled out a slew of measures to steady the currency before a rerun of Istanbul municipal elections next month. The bank regulator told lenders this week to wait one day before settling some large foreign-currency purchases. Some of the nation’s primary dealers have also been asked to support the government’s borrowing drive last week, according to three people with direct knowledge of the matter.

“At the time when Turkey needs to restore confidence in the lira among households, corporates and foreign investors, contradicting measures have been announced,” said Piotr Matys, a London-based analyst at Rabobank. “Such conflicting measures make Turkey increasingly unpredictable to foreign investors who will remain reluctant to deploy their capital despite an attractive valuation of Turkish assets.”

(Updates with analyst comments starting in third paragraph.)

Turkey’s Central Bank Undoes Tightening, Lowers Rate to 24%

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.


Leave a Reply

Your email address will not be published. Required fields are marked *