Will a rate hike suffice to stabilize the Turkish lira?

Turkey’s central bank under pressure to hike rates amid plunging lira

Erdogan, who's been a longtime advocate of alternative economic theories that favor lower rates, assumed more control of policy after constitutional changes empowering his office went into effect on June 24.

Turkey's central bank failed to give the market what it wanted, and investors are punishing it for it.

The Turkish central bank decides this morning whether to hike interest rates to push down inflation and support the flagging lira in a crucial test of its credibility one month after President Recep Tayyip Erdogan's election win spooked investors.

Jason Tuvey, senior emerging markets economist at Capital Economics, said the central bank decision showed Erdogan is "already using his strengthened position to influence monetary policy".

The lira, which has lost some 20 percent of its value so far this year, weakened as far as 4.94 against the dollar following the decision, from 4.7605 directly before.

Under the government of the Justice and Development (AK) Party, the number of Turkey's embassies in Africa has more than tripled, from 12 to 41, Erdogan said as he inaugurated a new building for Ankara's representation in Pretoria.

The lira trimmed was trading 2.8 percent lower at 4.872 per dollar as of 3:07 p.m.in Istanbul.

Turkey working on development of new system of military service

Turkey's central bank has been hiking rates sharply in recent months in an effort to stem its sliding currency.

They dumped the nation's bonds, pushing the yield on the 10-year note up by the most in data going back to 2010. "We see the currency remaining exposed to further sell-off pressure going forward", which will exacerbate inflation and raise the risk of a "sharper slowdown in economic activity", she said.

"The committee assessed that it might be necessary to maintain a tight monetary stance for an extended period".

In a statement, rate setters led by Governor Murat Cetinkaya indicated lira weakness is a contributing factor to inflation, but they also said previous rate increases will eventually lead to slower gains in consumer prices.

Turkey's trade with BRICS countries reached 60.7 billion USA dollars in 2017, with 7.3 billion dollars in exports and 53.4 billion dollars in imports, according to Turkey's statistical authority TurkStat.

"An emergency hike seems to be the only way out of this loop", Demir said.

"The downside of the strategy is that it can not go on forever", Neuteboom said.

New U.S. Russia sanctions push slows in Congress before recess
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