ibusinesslines.com
ibusinesslines.com November 21, 2018


Erdogan decree bans foreign currency property sales in Turkey

14 September 2018, 12:02 | Kelvin Horton

Erdogan decree bans foreign currency property sales in Turkey

DXY Index Sideways Grind Continues ahead of BOE ECB Tomorrow

The monetary policy committee said deterioration in pricing behaviour continued to pose upside risks on the inflation outlook, despite weaker domestic demand conditions.

Against expectations, the central bank did not raise rates at its last meeting in July. It later shed some of those gains but was still up 3.0 per cent in value at 6.14 to the dollar.

Erdogan again described interest rates as a "tool of exploitation" but vowed that "we can not be taken advantage of".

Earlier in the day, Erdogan published an executive decree that forces contracts between two entities in Turkey to be made in liras rather than foreign currencies.

The Turkish central bank on Thursday hiked the one week repo auction rate 625 basis points from 17.75 per cent to 24 per cent, significantly higher than the Bloomberg consensus of 21 per cent.

"Hemati told the media a meeting with the administrators of the Turkish and Russian Central Banks is expected in the near future and he hopes the agreed topics would rapidly come into effect", the Turkish agency said.

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

Thursday's decree and Erdogan's remarks come after the lira's drastic fall in value against the U.S. dollar last month, during one of the worst diplomatic rows between North Atlantic Treaty Organisation allies Washington and Ankara.


It said the policy would be "maintained decisively until inflation outlook displays a significant improvement".

Erdoğan has always been pressuring the bank to keep interest rates low to encourage economic growth. Late last month, South America's second-largest economy saw that rate jump to a staggering 60 percent in a bid to ease investor fears. "If you say "inflation is the cause, the rate is the result", you do not know this business, friend", he added.

"Erdogan's comments clearly show that he does not support this and it becomes much more hard, if not impossible, for the Turkish central bank to tighten enough to stabilize the lira and get inflation under control", Esther Reichelt, a forex strategist at Commerzbank in Frankfurt, told DW.

He earlier charged the bank with failing to control inflation and again aired his unorthodox view that low rates bring inflation down. And on the morning of the rate hike decision, Erdogan was busy.

While the lira's plight has made it "rational to expect at least 1000 basis points" added to interest rates, opposition to higher borrowing costs among Turkish officials made a smaller increase more realistic, Rabobank currency strategist Piotr Matys said before the decision.

The bank later said on Twitter that funding would be provided via the policy rate, the one week repo auction rate, instead of through overnight lending from September 14.

The sense of doom was compounded on August 1, when the United States imposed selective sanctions on Turkey over the detainment of an American pastor.



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