Sunday, 18 November, 2018

Erdogan decree bans foreign currency property sales in Turkey

USDTRY May Hit Record High on Turkish Central Bank Inaction Erdogan appoints himself chairman of Turkey's sovereign wealth fund
Priscilla Morrison | 14 September, 2018, 14:43

During a speech to officials from his AK Party in Ankara on Friday, Erdogan also said Turkey would see the result of the central bank's independence after a substantial rate increase that was made a day earlier.

Turkish President Recep Tayyip Erdogan has accused the United States of launching what he called a "heinous economic attack" on Turkey after the national currency lira hit a record low following U.S. sanctions.

The central bank's interest rate hike, which surprised investors with its magnitude, comes amid growing concerns that Erdoğan is pursuing policies that will eventually bankrupt the country.

He's delivered on that pledge, ousting the old guard of policy makers who'd guided the economy since 2002 and giving himself the sole authority to make appointments at the central bank and other state organizations.

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

"We can not allow the use of the tool of exploitation that is interest rates", Erdogan told a meeting in Istanbul on Thursday.

The lira reacted strongly to the decision, rising by five percent to the United States dollar.

There had been indications from the bank that it would raise rates after inflation came in at almost 18 percent in August.

More news: Hurricane Florence's uncertain track sows fear; 10 million in crosshairs

TRT World's Turkey analyst Yusuf Erim has more.

In another bid to prop up the lira, Erdogan earlier on Thursday ordered by decree that property agreements in foreign currencies would not be allowed.

The bank is also fighting a losing battle against inflation with annual consumer price inflation hitting 17.9 percent last month, its highest level since late 2003.

The bank implemented what economists described as a hidden interest rate hike in mid-August, forcing banks to borrow at the higher 19.25 per cent through the overnight lending facility. "If you say 'inflation is cause, the rate is the result, ' you do not know this business, friend".

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.

Addressing a meeting of Turkish tradespeople in Ankara on Thursday, before the rate decision was announced, Erdoğan said the central bank is independent and takes its own decisions.

Turkey's currency and inflationary troubles are also compounded by the threat of steel and aluminium tariffs from the USA as well as sanctions over the detention of an American evangelical pastor.

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