Erdogan takes wheel of Turkish wealth fund

14 September, 2018, 14:43 | Author: Regina Silva
  • Erdogan takes wheel of Turkish wealth fund

The increase, which was higher than expected, boosted the lira by five percent against the dollar and may ease investor concern about Erdogan's influence on monetary policy.

Turkish President Tayyip Erdogan has appointed himself chairman of the country's sovereign wealth fund and completely changed its board, naming Finance Minister Berat Albayrak as his deputy, the country's Official Gazette said on Wednesday.

Turkish Central Bank on Thursday hiked its one-week repo rate by 625 base points.

Must give a lesson to those who exploit with price hikes.

The lira reacted strongly to the decision, rising by 5 per cent in value to 6.0 lira to the USA dollar.

But just hours before the CBRT decision, president Erdogan had dubbed interest rates as a "tool of exploitation", with the lira sliding further.

It vowed the tight stance in monetary policy would be "maintained decisively until inflation outlook displays a significant improvement".

TRT World's Turkey analyst Yusuf Erim has more.

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The bank's decision came shortly after Erdogan triggered tumult by repeating his hostility to higher borrowing costs and issuing an order that limited the use of foreign currency in domestic transactions.

Ignoring calls for restraint from President Recep Tayyip Erdoğan, the bank raised its main short-term rate from 17.5% following weeks of pressure from global investors.

There had been indications from the bank that it would raise rates after inflation came in at almost 18 percent in August.

In a decision announced earlier on Thursday, he ruled that property sales and rental agreements must be made in lira, putting an end to such deals in foreign currencies.

Currently, the interest rates are below the annual inflation level in Turkey. "If you say 'inflation is cause, the rate is the result, ' you do not know this business, friend".

The bank later said funding would be provided via the policy rate, the one week repo auction rate, instead of through overnight lending from September 14.

The rate rise comes on the same day as the Bank of England left the interest rate untouched at 0.75%, citing heightened risks to global growth as a result of volatility within emerging markets, as well as tensions between the USA and China.

Relations with the United States deteriorated last month after Washington imposed sanctions on two Turkish ministers over the detention of an American pastor and President Donald Trump doubled steel and aluminium tariffs on Turkey.

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