Turkey’s central bank slowed its pace of interest rate increases but pledged to amplify their impact on credit markets with alternative measures.
In a surprise move on Thursday, the Monetary Policy Committee, led by Governor Hafize Gaye Erkan, raised the benchmark to 17.5 per cent from 15 per cent.
Only four economists in a Bloomberg survey correctly predicted the decision, with most analysts expecting a bigger move.
Accompanying the downshift was a decision by the MPC on what it called “quantitative tightening and selective credit tightening to support the monetary policy stance”.
The MPC also said in a statement that it would continue with a gradual “simplification” of existing regulatory measures.
The central bank promised additional steps to remove excess liras from financial markets, days after an abundance of local currency at domestic lenders forced the monetary authority to step in and mop up some of the liquidity for the first time since late 2019.
“Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved,” the committee said.
The decision dials back the pace of rate increases that started after Ms Erkan’s appointment last month, as part of a tightening cycle that will also feature alternative tools.
The restraint in moving away from the easy-money policy favoured by President Recep Tayyip Erdogan further exposes local assets to a sell-off as inflation still hovers near 40 per cent.
“A rate hike by the central bank that was below even the lowest expectations is a negative development for the lira,” said Haluk Burumcekci, an Istanbul-based economist.
Policymakers could opt to raise reserve requirements for commercial lenders to reduce lira liquidity in the system, he said.
Turkish stocks extended their rally while the lira maintained losses after the announcement, trading about 0.3 per cent weaker against the dollar as of 3.36pm in Istanbul.
“The size of the central bank’s rate hike is a surprise given the financial system’s recent surge in lira liquidity,” said Bloomberg Economics.
“In our view, this may prompt the central bank to tighten its reserve requirements – reminiscent of a move previously employed by the central bank. That, if it happens, would cast further doubt over the rates outlook.”
In unwinding years of unconventional measures, Mr Erdogan’s new economic team is scaling back support for the lira, rebuilding foreign reserves and simplifying regulations that were used to stabilise the Turkish currency.
In June, the central bank delivered its first rate increase in more than two years, opting for a 650 basis-point step that underwhelmed the market.
The Turkish President has also looked for financial help abroad, visiting the Gulf region this week and securing provisional deals with the UAE that could be worth more than $50 billion.
Foreign direct investments and higher tourism income will help Turkey narrow the deficit in its current account and rein in inflation, the central bank said in its statement.
At the same time, authorities are moving ahead with fiscal measures that Barclays said are “stronger than we previously expected”.
The new steps – which range from increases in several value-added tax rates to higher corporate levies for banks – became necessary in part to pay for costly promises made to voters by Mr Erdogan before May elections.
“The authorities might be planning to compensate for less than ideal tightening on the monetary policy side by tighter fiscal policy,” Barclays economist Ercan Erguzel said in a research note before the rate announcement.
The balancing act will grow even more tricky with the approach of local elections next March. Faster economic growth could again become a priority as Mr Erdogan focuses on trying to wrest some of the country’s biggest cities from the opposition.
In the backdrop, the lira is trading near record lows in a further threat to inflation. The Turkish currency has lost more than 30 per cent of its value this year, the biggest depreciation in emerging markets after Argentina’s peso.
Under Ms Erkan’s predecessor, the central bank was projecting that price gains would end the year at 22.3 per cent, an outlook likely to be revised higher next week when the central bank unveils its new quarterly inflation report.
The presentation will effectively mark Ms Erkan’s public debut since the new governor has so far made only sparse remarks about the direction of monetary policy.
HEADLINE HERE
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Brief scores:
Manchester City 2
Gundogan 27', De Bruyne 85'
Crystal Palace 3
Schlupp 33', Townsend 35', Milivojevic 51' (pen)
Man of the Match: Andros Townsend (Crystal Palace)
India team for Sri Lanka series
Test squad: Rohit Sharma (captain), Priyank Panchal, Mayank Agarwal, Virat Kohli, Shreyas Iyer, Hanuma Vihari, Shubhman Gill, Rishabh Pant (wk), KS Bharath (wk), Ravindra Jadeja, Jayant Yadav, Ravichandran Ashwin, Kuldeep Yadav, Sourabh Kumar, Mohammed Siraj, Umesh Yadav, Mohammed Shami, Jasprit Bumrah.
T20 squad: Rohit Sharma (captain), Ruturaj Gaikwad, Shreyas Iyer, Surya Kumar Yadav, Sanju Samson, Ishan Kishan (wk), Venkatesh Iyer, Deepak Chahar, Deepak Hooda, Ravindra Jadeja, Yuzvendra Chahal, Ravi Bishnoi, Kuldeep Yadav, Mohammed Siraj, Bhuvneshwar Kumar, Harshal Patel, Jasprit Bumrah, Avesh Khan
Dhadak
Director: Shashank Khaitan
Starring: Janhvi Kapoor, Ishaan Khattar, Ashutosh Rana
Stars: 3
RESULTS
Catchweight 63.5kg: Shakriyor Juraev (UZB) beat Bahez Khoshnaw (IRQ). Round 3 TKO (body kick)
Lightweight: Nart Abida (JOR) beat Moussa Salih (MAR). Round 1 by rear naked choke
Catchweight 79kg: Laid Zerhouni (ALG) beat Ahmed Saeb (IRQ). Round 1 TKO (punches)
Catchweight 58kg: Omar Al Hussaini (UAE) beat Mohamed Sahabdeen (SLA) Round 1 rear naked choke
Flyweight: Lina Fayyad (JOR) beat Sophia Haddouche (ALG) Round 2 TKO (ground and pound)
Catchweight 80kg: Badreddine Diani (MAR) beat Sofiane Aïssaoui (ALG) Round 2 TKO
Flyweight: Sabriye Sengul (TUR) beat Mona Ftouhi (TUN). Unanimous decision
Middleweight: Kher Khalifa Eshoushan (LIB) beat Essa Basem (JOR). Round 1 rear naked choke
Heavyweight: Mohamed Jumaa (SUD) beat Hassen Rahat (MAR). Round 1 TKO (ground and pound)
Lightweight: Abdullah Mohammad Ali Musalim (UAE beat Omar Emad (EGY). Round 1 triangle choke
Catchweight 62kg: Ali Taleb (IRQ) beat Mohamed El Mesbahi (MAR). Round 2 KO
Catchweight 88kg: Mohamad Osseili (LEB) beat Samir Zaidi (COM). Unanimous decision
What is blockchain?
Blockchain is a form of distributed ledger technology, a digital system in which data is recorded across multiple places at the same time. Unlike traditional databases, DLTs have no central administrator or centralised data storage. They are transparent because the data is visible and, because they are automatically replicated and impossible to be tampered with, they are secure.
The main difference between blockchain and other forms of DLT is the way data is stored as ‘blocks’ – new transactions are added to the existing ‘chain’ of past transactions, hence the name ‘blockchain’. It is impossible to delete or modify information on the chain due to the replication of blocks across various locations.
Blockchain is mostly associated with cryptocurrency Bitcoin. Due to the inability to tamper with transactions, advocates say this makes the currency more secure and safer than traditional systems. It is maintained by a network of people referred to as ‘miners’, who receive rewards for solving complex mathematical equations that enable transactions to go through.
However, one of the major problems that has come to light has been the presence of illicit material buried in the Bitcoin blockchain, linking it to the dark web.
Other blockchain platforms can offer things like smart contracts, which are automatically implemented when specific conditions from all interested parties are reached, cutting the time involved and the risk of mistakes. Another use could be storing medical records, as patients can be confident their information cannot be changed. The technology can also be used in supply chains, voting and has the potential to used for storing property records.
Singham Again
Director: Rohit Shetty
Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone
Rating: 3/5
WOMAN AND CHILD
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MATCH INFO
Tottenham 4 (Alli 51', Kane 50', 77'. Aurier 73')
Olympiakos 2 (El-Arabi 06', Semedo')
Not Dark Yet
Shelby Lynne and Allison Moorer
Four stars
Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
Match info
Manchester City 3 (Jesus 22', 50', Sterling 69')
Everton 1 (Calvert-Lewin 65')
Lexus LX700h specs
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Killing of Qassem Suleimani
UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants
Water waste
In the UAE’s arid climate, small shrubs, bushes and flower beds usually require about six litres of water per square metre, daily. That increases to 12 litres per square metre a day for small trees, and 300 litres for palm trees.
Horticulturists suggest the best time for watering is before 8am or after 6pm, when water won't be dried up by the sun.
A global report published by the Water Resources Institute in August, ranked the UAE 10th out of 164 nations where water supplies are most stretched.
The Emirates is the world’s third largest per capita water consumer after the US and Canada.
Gulf Under 19s final
Dubai College A 50-12 Dubai College B
What's in the deal?
Agreement aims to boost trade by £25.5bn a year in the long run, compared with a total of £42.6bn in 2024
India will slash levies on medical devices, machinery, cosmetics, soft drinks and lamb.
India will also cut automotive tariffs to 10% under a quota from over 100% currently.
Indian employees in the UK will receive three years exemption from social security payments
India expects 99% of exports to benefit from zero duty, raising opportunities for textiles, marine products, footwear and jewellery
