Turkey to hold second economy board meeting in week ‘to discuss lira’

Turkey to hold second economy board meeting in week ‘to discuss lira’

Turkey to hold second economy board meeting in week ‘to discuss lira’ Turkish Prime Minister Binali Yıldırım will convene top economy officials to discuss the Turkish Lira’s weakness and other economic issues for the second time in five days on Nov. 22, sources in his office said, as pressure grew for the Central Bank to hike rates to support the currency.

Speaking after a cabinet meeting on Nov. 21, Deputy Prime Minister Numan Kurtulmuş said the board had been closely following the economic developments but that there was no extraordinary situation.

“In the meeting last week, what needs to be done regarding a general rising trend in the U.S. dollar was discussed,” the deputy prime minister said.

“Another key discussion point was a strong determination to keep making structural reforms. The Economic Coordination Board has been closely following the general economic developments. There has been no extraordinary development in the economy and everything is under control,” he said, adding that the Central Bank would do what it needs to do in an independent manner. 

The lira has lost around 14 percent of its value against the dollar this year, hitting a record low of 3.4080 on Nov. 18, prompting a meeting of the government’s economic coordination committee.

After its last meeting on Nov. 18, sources in Yıldırım’s office said the Central Bank had agreed it would “take the necessary steps” to ensure price stability.

The board meets regularly, usually on a weekly basis, to discuss and set macroeconomic policy.
But this meeting, lasting five hours, came after the national Turkish Lira hit another record low against the U.S. dollar, at 3.4078, following U.S. Federal Reserve Chair Janet Yellen’s remarks on Nov. 17 that the Fed could raise interest rates “relatively soon.”  The committee will meet again on Nov. 22 to discuss the currency weakness and recent economic developments, the sources said on Nov. 21, as reported by Reuters. 
The announcement gave a small boost to the lira, which briefly firmed to 3.3674 against the dollar from 3.3815 beforehand. At 10:43 GMT, the lira had slipped back to 3.3735.

Sentiment towards the currency was boosted by the perception that the government was taking the lira weakness seriously.

“The foreign exchange rate is a barometer at least as important as interest rates, inflation and wages,” Deputy Prime Minister Mehmet Şimşek, who is on the committee, wrote on Twitter on Nov. 21.

A Reuters poll on Nov. 18 showed economists are divided on whether the Central Bank will hike its main interest rate for the first time in almost three years this week. Six of 13 institutions in the poll expect the bank to hike its main one-week repo rate by 25 basis points to 7.75 percent on Nov. 24.

That would be the first hike since the end of January 2014, when the bank met in emergency session and raised its main interest rate to 10 percent to stem sharp lira falls. The poll was held before the statement on the committee meeting was issued.

The lira has been hit by global volatility in the wake of Donald Trump’s U.S. election victory, and by concerns about domestic Turkish politics after July’s failed coup.

A recent spat between Ankara and the European Union, Turkey’s main business partner, has also played a role in the fall of the lira, according to experts.