Turkish central bank to postpone the frequency of further interest rate hikes

Turkish central bank to postpone the frequency of further interest rate hikes

Today, Turkey’s central bank will announce its decision on whether to raise interest rates again as the country’s economy finds

FILE PHOTO – A money changer holds Turkish lira banknotes next to U.S. dollar bills at a currency exchange office in central Istanbul

Photo: Reuters/Murad Sezer

Today, Turkey’s central bank will announce its decision on whether to raise interest rates again as the country’s economy finds some solid ground.

The lira has had a tumultuous few months, rapidly falling against the US dollar in August and fluctuating at lower rates since. The central bank has desperately tried to regain control of Turkey’s rising inflation which now stands at nearly 25%. Interest rates have doubled this year and were hiked by over 6% last month.

It seems that these measures have had some effect, as the lira has since stabilised and recouped some losses. However, given that real interest rates are still negative and that GDP growth last quarter was less than 1%, Turkey’s economic woes are likely far from over.

Due to the latter causing fears of a recession, expect the central bank hold-off on further rate hikes this month—a decision that will please anti-interest rate President Erdogan. Indeed, watch for Turkey’s growth figures this coming quarter. If inflation continues to increase while growth continues to slow, the central bank will need to find other means to reduce rising prices or risk a recession come 2019.

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