May 09 2018

Turkish govt. vows measures to halt lira slide and inflation

After a meeting called by the Turkish president, the presidency has published a statement vowing to take measures to address the country’s plummeting lira and rising inflation while committing to its growth plans.

In the midst of yet another alarming week for the Turkey during which the lira slid to a record low of 4.37 against the U.S. dollar, Turkish President Recep Tayyip Erdoğan called a meeting on Wednesday with the country’s top economic officials in a bid to stabilise the ailing economy.

Many observers expected the government to bite the bullet with a rate increase that the president has proven historically hesitant to implement, and the presidency’s statement on the meeting appears to support that view.

“Measures will be taken to more effectively combat inflation and reduce the pressure on interest and exchange rates,” said the statement, adding that the central bank will be employed to do so.

The most likely measure suggested by the announcement is a small rates hike, suggested Ahval’s Mark Bentley.

Analysts have said an increase of at least 300 basis points to 16.5 percent would be necessary to stop the lira’s decline and halt inflation.