Turkish cbank to take action as lira tumbles

ISTANBUL, May 16, (RTRS): Turkey’s central bank said on Wednesday it would take action against the tumbling of the lira, after it weakened beyond 4.5 against the dollar for the first time, hit by concern about President Tayyip Erdogan’s influence over monetary policy.

The statement from the bank came after investors lashed the lira for two days running following comments from Erdogan, who said he planned to take greater control of the economy after a national election next month.

That has exacerbated fears about central bank independence. Erdogan, a self-described “enemy of interest rates”, wants borrowing costs lowered to fuel credit growth and new construction. Financial markets want to see decisive interest rate increases to rein in doubledigit inflation.

“The (central bank) is closely monitoring the unhealthy price formations in the markets,” the bank said in a statement. “Necessary steps will be taken, also considering the impact of these developments on the inflation outlook.”

Turkish media reported that Erdogan would meet with the central bank governor, Murat Cetinkaya, and other economic officials to discuss market developments. The lira clawed back some of its losses as expectations of emergency action strengthened.

“Market sentiment towards Turkey is quickly evaporating,” said Jason Tuvey, an emerging markets economist at Capital Economics, in a note.