Turkish bank raised its interest rate up to 24 percent to help Lira weakening against US Dollar

News24xx.com - The Turkish Central Bank raised its benchmark interest rate by 625 bps to 24 percent. The increase in the benchmark interest rate was carried out as a step to strengthen the lira exchange rate against the US dollar and reduce investor concerns regarding the influence of President Tayyip Erdogan on central bank policy.

Turkey raised the repo rate one week to 24 percent on Thursday, September 13th 2018. The benchmark interest rate has thus rise to 11.25 percent since the end of April. This policy emerged even though Erdogan repeatedly opposed high interest rates. Erdogan also said that high inflation was a result of the mistakes of the central bank in taking policy.

Lira yesterday managed to strengthen more than four percent to the level of 6.08 lira per US dollar. Nevertheless, during trading throughout the day, the lira moved back weaker. Turkey's central bank policy also has an impact on the currencies of a number of developing countries. The South African rand and Mexican pesos rose 1.6 percent and 1 percent respectively.

"The increase in interest rates by the Turkish central bank deserves praise. But the key to the future is President Erdogan's view on monetary tightening" said Hirayama City, Senior High School Economist at Nikko Securities, as quoted by Reuters on Friday, September 14th 2018.

He considered Erdogan would not respect the independence of the central bank. The central bank is likely to lose its credibility again. An increase in interest rates will be in vain if the country's monetary policy is disrupted by politics.

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