Bloomberg News

Turkey Bank to Announce Plan to ‘Significantly’ Boost Lira

October 24, 2011

(Updates with economists in third and last paragraphs.)

Oct. 24 (Bloomberg) -- Turkey’s central bank will announce a plan to “significantly” strengthen the lira at a news conference in two days time.

The plan will also help ensure price stability, the bank said in an e-mailed statement today. Rates policy and foreign currency reserves policy will also be included in the plan, to be announced by governor Erdem Basci. The measures will be announced together with the bank’s quarterly inflation report.

“We think that the bank could gradually reduce the lira liquidity volume that it provides through one-week repo auctions,” Ozgur Altug, chief economist at BGC Partners in Istanbul, said in e-mailed comments. “We think that some measures will be on the tightening front, such as interest rates, probably not the policy rate, but overnight borrowing and lending rates.”

The central bank raised the overnight lending rate to 12 percent from 8 percent on Oct. 20, in a latest attempt to strengthen the lira, which has lost 15.5 percent this year, the most in emerging markets after the South African rand. It kept the benchmark one-week repo rate unchanged at 5.75 percent.

The lira gained 0.4 percent to 1.8257 per dollar at 12:14 p.m. in Istanbul, the highest level since Oct. 13.

“The market wants ‘significant’ rate increases to more aggressively cool domestic demand and rein in the current account deficit which is the structural cause of lira weakness, Tim Ash, chief of emerging market research at Royal Bank of Scotland Group Plc, said in an e-mail to clients. ‘‘Not sure that ‘measures’ short of rate hikes will help.’’

--Editors: Mark Bentley, Aydan Eksin

To contact the reporter on this story: Mark Bentley in Istanbul at mbentley3@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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