Nov 16 2017

Turkish lira to strengthen, inflation to slow - adviser

Turkey’s lira will strengthen against the dollar thanks to measures announced by the country’s central bank, according to Cemil Ertem, President Recep Tayyip Erdoğan’s chief economic adviser.

The currency’s levels are “exaggerated and speculative” when looking at Turkey’s economic fundamentals, Ertem said, according to Istanbul-based newspaper Dünya.

Ertem said the central bank’s decision to ease the liquidity of Turkish corporates through “non-deliverable foreign exchange forward transactions” would be effective in stemming the lira’s recent losses. The central bank will announce auctions in the coming days, including the size of the transactions and currency levels at which they will be made, he said.

The central bank said last week it would seek to help the corporate sector to better manage its mounting exchange rate risk by introducing the new forward transactions. The tool allows the difference between forward exchange rates set on the contract day and the spot rate on the settlement day to be repaid in Turkish lira.

Güldem Atabay Şanlı, an economist and contributor to Ahval, said in an analysis this week that the central bank was implementing the measure because of pressure by the government to refrain from raising interest rates.

Ertem also said there will be a big decline in the inflation rate in the first quarter of next year and central bank targets for price increases were “realistic’.