Erdogan appoints himself chairman of Turkey’s sovereign wealth fund

Erdogan appoints himself chairman of Turkey's sovereign wealth fund

In a bid to shore up the Turkish lira, Erdoğan's government issued a decree on Thursday banning the use of foreign currency in the sale and renting of property and the leasing of vehicles.

The bank's Monetary Policy Committee raised the one-week repo rate to 24 percent, meaning it has now increased interest rates by 11.25 percentage points since late April in an attempt to put a floor under the tumbling currency.

The Turkish lira gained to its strongest level against the dollar this month amid speculation that the central bank will increase interest rates on Thursday to stem double-digit inflation.

Turkey's currency crisis has been driven by concerns about Erdogan's influence on monetary policy, but also more recently by the country's diplomatic row with the United States.

There had been indications from Turkey's central bank that it would raise rates, after inflation came in at almost 18% in August, according to official data.

The lira reacted strongly to the decision, rising by five per cent in value to 6.0 lira to the U.S. dollar.

The central bank said there was still an upside risk to Turkey's inflation outlook from what it called a deterioration in pricing behaviour, despite weaker domestic demand conditions.

Turkey's central bank said that inflation developments pointed "to significant risks to price stability" due to the recent fall in value of the lira.

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"Accordingly, the Committee has made a decision to implement a strong monetary tightening to support price stability", the monetary policy committee statement said.

"The central bank will continue to use all available instruments in pursuit of the price stability objective", the central bank's monetary policy committee said in a statement.

"It was a big surprise to us, but probably to every Turkey-watcher", said Nora Neuteboom, an economist at ABN Amro, saying the move was a "positive signal" with the bank wanting to show its independence and commitment to fight inflation.

He earlier charged the bank with failing to control inflation and again aired his unorthodox view that low rates bring inflation down.

The central bank said it was returning to funding via one-week repos from Friday, having funded the market at an overnight lending rate of 19.25 percent for the last month.

The interest rate decision will be announced at 1100 GMT. "If you say ´inflation is the cause, the rate is the result´, you do not know this business, friend", he added.

President Recep Tayyip Erdogan on Wednesday appointed himself the chairman of Turkey's sovereign wealth fund and named his son-in-law and Finance Minister Berat Albayrak as deputy chairman.

Relations with the USA 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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