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Turkey: Everyone expects interest rate cut from the Central Bank while the pound reaches 15 against the euro

The Turkish lira is in a free fall and on Wednesday it moves again to an all-time low. The pound is falling more than 3% to 14.8 against the dollar on Wednesday, amid prospects for a further cut in interest rates tomorrow by the Central Bank of Turkey (TCMB) at the behest of President Recep Tayyip Erdogan and shortly before a decision policy by the US Federal Reserve that may raise more funds from emerging markets.

The MSCI Emerging Markets (EM) stock index fell 0.5%, while the currencies fell 0.1% before the end of the two-day Fed policy meeting.

The US Federal Reserve is expected to broadly outline its plans to tighten policy and raise interest rates next year, which is likely to put pressure on IM assets.

“While it is rare for policy changes to be made at December meetings, the Fed is under tremendous pressure, given the persistence of rising inflation, to accelerate the previously announced decline to a minimum,” said Danielle DiMartino Booth, chief executive officer and chief strategist. Quill Intelligence.

The Turkish lira remains by far the EM currency with the worst performance this year, after hitting a record low of 14.99 earlier this week.

The Turkish central bank is widely expected to cut interest rates again on Thursday, extending the unorthodox monetary policy of President Recep Tayyip Erdogan, despite the fact that inflation exceeded 20% last month, with opposition voices and independent talk about much higher real inflation, accusing the Turkish government of false information.

The TCMB has cut its key interest rate by 400 basis points to 15% since September as part of Erdogan’s plan to prioritize exports and lending, although economists see the move as reckless. The bank has intervened in the foreign exchange market four times in the last two weeks, selling billions of dollars to slow down the sell-off.

Petros Kranias

Read also:

* Turkey: Concerns over capital controls following teacher warning of “emergency”

* Turkish professor: Erdogan may declare state of emergency due to financial crisis

* Fitch warns 13 Turkish banks of impending downgrade

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Source From: Capital

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