Turkey’s central bank hints at rate increase as inflation rises

Turkey’s central bank has hinted at a long-awaited interest rate rise next week after new data showed inflation approaching four times its official target. Figures released on Monday showed annual consumer prices rose 17.9 per cent in August, while producer prices showed an annual increase of 32.1 per cent. In a statement following the publication of the data, the central bank said its “monetary stance will be adjusted” when its rate-setting committee meets on Thursday next week. It warned that the latest data posed “significant risks to price stability”. Turkey’s currency, the lira, regained some of its losses to trade down 1.2 per cent at TL6.6 to the US dollar. In an interview with Reuters, Turkey’s new finance minister, Berat Albayrak, said that the country had reached the point where it needed a “full-fledged fight against inflation.” The central bank had previously stunned international investors by refusing to raise rates despite the lira losing 40 per cent of its value against the dollar this year and inflation climbing far beyond its official 5 per cent target. Turkey’s president, Recep Tayyip Erdogan, is a staunch opponent of high interest rates, arguing that they cause rather than curb inflation. Instead of raising the main policy rate — the one-week repo — which stands at 17.75 per cent, the central bank and other government bodies have announced a series of technical measures viewed by the markets as insufficient.

Source : www.ft.com

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