Turkey’s Treasury said on Friday that fighting inflation remained a priority in its macroeconomic policy after it and other state institutions announced measures to support an economy beset by rising prices and a falling lira.
The Treasury said it will issue domestic bonds indexed to the revenues of state-owned enterprises to encourage lira asset savings, the central bank raised the reserve requirement rate for commercial lira loans from 10% to 20% and the banking watchdog set a threshold due date for personal loan.
“Fighting inflation remains the top priority. In this struggle, the importance of coordination between institutions is clear and all our institutions are acting with the understanding of a joint struggle”, according to a statement from the Treasury.
The measures brought volatility to the lira. The currency even firmed up to 16.8 per dollar before the announcements, and went to 17.3 after they were introduced.
The lira is down 23% this year, on top of last year’s 44% drop, which was caused by a series of unorthodox rate cuts by the central bank carried out under pressure from President Tayyip Erdogan despite rising inflation.
The lira crisis, in turn, has exacerbated inflation, especially this year, with the war in Ukraine pushing up energy prices.
The economic and market woes come as Erdogan faces difficult elections in mid-2023, with his approval ratings already affected by soaring inflation, which hit 73.5% in May.
Source: CNN Brasil
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