Turkey’s lira plummets after central bank fails to lift interest rate
Erdogan’s interference in bank policy has compounded the lira’s 22% slide in 2018, the biggest drop in emerging markets after the Argentinean peso
Turkey’s central bank failed to give the market what it wanted, and investors are punishing it for it. They dumped the nation’s bonds, pushing the yield on the 10-year note up by the most in data going back to 2010. Policy makers unexpectedly held the benchmark one-week repo rate at 17.75% on Tuesday, but the yield in the secondary market surged 184 basis points. Most economists were forecasting a 100-basis point increase to the repo rate. Longer-dated notes typically reflect inflation expectations better than shorter-maturity securities. The lira weakened as much as 4.2% to approach a record low, as confidence that the central bank had the resolve to quell inflation running at more than three times the bank’s official target of 5%, evaporated. Investors have said higher rates are needed to cool the economy and many expected policy makers to help put to rest speculation that President Recep Tayyip Erdogan’s opinions were the main factor in central bank decisions. Erdogan, who has be...
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