عربي English Türkçe اردو فارسى
Logo
Latest News
Business

Turkish Lira at New Low, Central Bank Seen Sticking to Playbook

A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, on August 8, 2018. (Getty Images)
A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, on August 8, 2018. (Getty Images)
TT
TT

Turkish Lira at New Low, Central Bank Seen Sticking to Playbook

A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, on August 8, 2018. (Getty Images)
A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, on August 8, 2018. (Getty Images)

The Turkish lira plumbed more record lows on Monday, touching 7.6 against the dollar, as expectations grew that the central bank would keep its key interest rate steady this week but continue to tighten credit via other measures.

Analysts including those at Goldman Sachs said the bank would likely use its policy meeting on Thursday to nudge up its late liquidity window (LLW), which at 11.25% is the highest of a handful of interest rates that it controls.

That could help protect the lira - which has tumbled 22% this year and lost half its value since the end of 2017 - from a more dramatic fall.

But analysts said such a move would probably only delay a formal hike to the key policy rate that has remained at 8.25% since May.

The currency was at 7.5900 at 0917 GMT, 0.3% weaker than Friday’s close.

It has dipped in 13 of the last 15 sessions and is among the world’s worst performers in 2020 in part due to aggressive monetary easing over the last year that left real rates deeply negative.

The bank is reluctant to restrict growth just as the economy is recovering from a nearly 10% contraction in the second quarter due to the pandemic. It also expects inflation to dip, although price rises have remained stuck in double-digits.

While most economists polled by Reuters expect no formal hike this week, they predict the central bank will continue to take steps to raise the weighted average cost of funding , which has climbed to 10.4% from 7.3% in two months.

Among the minority, Deutsche Bank said it expects a 200 basis-point rise in the key one-week repo rate on Thursday.

But Kevin Daly at Goldman Sachs said the bank would rather likely raise the LLW to 12% given the combined pressure of depleted reserves, the hit to the tourism sector, and Turkey’s heavy external loan payment schedule through year end.

Ehsan Khoman at MUFG Bank forecast a rise in LLW to 11.75%. “The main risk ... is that the authorities tighten policy too little and too late as they prefer to remain supportive of growth, a policy course which would add to the risks around the lira,” he wrote.

Most Viewed

 
 
Business

US Economy Grew at Solid 3% Rate Last Quarter, Government Says in Final Estimate

FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
TT
TT

US Economy Grew at Solid 3% Rate Last Quarter, Government Says in Final Estimate

FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)

The American economy expanded at a healthy 3% annual pace from April through June, boosted by strong consumer spending and business investment, the government said Thursday, leaving its previous estimate unchanged.
The Commerce Department reported that the nation's gross domestic product — the nation's total output of goods and services — picked up sharply in the second quarter from the tepid 1.6% annual rate in the first three months of the year, The Associated Press reported.
Consumer spending, the primary driver of the economy, grew last quarter at a 2.8% pace, down slightly from the 2.9% rate the government had previously estimated. Business investment was also solid: It increased at a vigorous 8.3% annual pace last quarter, led by a 9.8% rise in investment in equipment.
The final GDP estimate for the April-June quarter included figures showing that inflation continues to ease, to just above the Federal Reserve’s 2% target. The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5% annual rate last quarter, down from 3% in the first quarter of the year. Excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.8% pace, down from 3.7% from January through March.
The US economy, the world's biggest, displayed remarkable resilience in the face of the 11 interest rate hikes the Fed carried out in 2022 and 2023 to fight the worst bout of inflation in four decades. Since peaking at 9.1% in mid-2022, annual inflation as measured by the consumer price index has tumbled to 2.5%.
Despite the surge in borrowing rates, the economy kept growing and employers kept hiring. Still, the job market has shown signs of weakness in recent months. From June through August, America's employers added an average of just 116,000 jobs a month, the lowest three-month average since mid-2020, when the COVID pandemic had paralyzed the economy. The unemployment rate has ticked up from a half-century low 3.4% last year to 4.2%, still relatively low.
Last week, responding to the steady drop in inflation and growing evidence of a more sluggish job market, the Fed cut its benchmark interest rate by an unusually large half-point. The rate cut, the Fed’s first in more than four years, reflected its new focus on shoring up the job market now that inflation has largely been tamed.
Some other barometers of the economy still look healthy. Americans last month increased their spending at retailers, for example, suggesting that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and high borrowing rates. The nation’s industrial production rebounded. The pace of single-family-home construction rose sharply from the pace a year earlier.
And this month, consumer sentiment rose for a third straight month, according to preliminary figures from the University of Michigan. The brighter outlook was driven by “more favorable prices as perceived by consumers” for cars, appliances, furniture and other long-lasting goods.
A category within GDP that measures the economy’s underlying strength rose at a healthy 2.7% annual rate, though that was down from 2.9% in the first quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
Though the Fed now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent and other necessities. Former President Donald Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.
On Thursday, the Commerce Department also issued revisions to previous GDP estimates. From 2018 through 2023, growth was mostly higher — an average annual rate of 2.3%, up from a previously reported 2.1% — largely because of upward revisions to consumer spending. The revisions showed that GDP grew 2.9% last year, up from the 2.5% previously reported.
Thursday’s report was the government’s third and final estimate of GDP growth for the April-June quarter. It will release its initial estimate of July-September GDP growth on Oct. 30.