ANKARA — The Turkish lira took one of its biggest
tumbles of the year on Wednesday over speculation that the central bank was
about to cut rates despite soaring inflation.
اضافة اعلان
Turkey's annual rate of inflation accelerated to 19.25
percent last month — the highest in two years and above the central bank's
benchmark interest rate of 19 percent.
The central bank has been vowing for months to keep real
interest rates positive so that Turks are not incentivized to spend money
instead of placing them in their accounts.
That would require it to hike its policy rate to at least
19.5 percent at its next policy meeting on September 23.
But Turkish Central Bank Governor Şahap Kavcıoğlu told
investors that consumer prices were expected to drop in the months ahead and
the bank will now use "core" inflation — which is below 17 percent
after excluding volatile items such as food and fuel — in future decisions.
"Extraordinary conditions that have arisen due to the
pandemic have increased the importance of core inflation indicators,"
Turkish media quoted Kavcıoğlu as saying.
"While determining the global monetary policy stance,
basic indicators excluding temporary factors arising from areas outside the
sphere of influence of monetary policy are taken as a basis."
The
Turkish lira fell by as much as 1.5 percent against the
US dollar and was trading around the 8.45 mark on Wednesday afternoon.
'Promise means nothing'
Turkey's central bank is nominally independent but has been
under constant pressure from President Recep Tayyip Erdoğan to lower interest
rates.
The Turkish leader has fired three central bank governors
since 2019 because they were either raising borrowing costs or not lowering
them rapidly enough.
Erdoğan is famous for subscribing to the unorthodox belief
that high interest rates cause high inflation instead of tamping it down by
hiking the cost of doing business.
Kavcıoğlu has kept the bank's policy rate unchanged for five
months and had previously vowed to focus on fighting inflation.
But Erdogan has indicated that he expects borrowing costs to
start coming down quickly to help stimulate growth.
BlueBay Asset Management analyst Timothy Ash said Kavcıoğlu's
comments showed that his "promise to keep positive real interest rates
means nothing really from a market perspective".
"He is obviously determined not to hike rates if in any
way he can get away with it, and will cut at the very earliest opportunity,"
he said in an email to clients.
'Financial stability risks'
Turkey's economy has demonstrated high resilience in the
face of external shocks and what many analysts view as years of mismanagement.
Gross domestic product grew by 1.8 percent despite the
coronavirus pandemic in 2020 and is expected to expand by at least eight
percent this year.
But analysts warn that this rapid growth and focus on state
lending creates ripe conditions for painful price increases that hurt people's
daily lives.
Official data show food and non-alcoholic beverage prices
jumping 29 percent in annual terms in July.
"Although Turkey is among the world's fastest growing
economies, according to official figures, and its GDP has long since surpassed
pre-pandemic levels, the authorities are loath to let growth cool," the
Oxford Economics consultancy said in a research note.
"These developments will reinforce price and financial
stability risks."
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