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Weakening Turkish Lira No Cause for Concern
World Economy

Weakening Turkish Lira No Cause for Concern

The sharp decline in the Turkish lira is of little concern because it has been triggered by external factors, Economy Minister Nihat Zeybekci said Monday, rebutting criticism that politics has undermined investor confidence in the currency.
Investors have sent the lira to a series of record lows this year, with traders and economists citing concern about the independence of the central bank and uncertainty about the make-up of Ankara’s economy team after June elections, Reuters reported.
But Zeybekci said in a speech that the lira’s slide was “not a cause for concern” because it is not caused by domestic factors.
He also said the negative impact of the weakening lira on April inflation would be offset by “seasonal effects.”
Finance Minister Mehmet Simsek made similar comments Monday about the lira’s weakness not being triggered by domestic factors. The lira has fallen around 15 percent against the dollar this year, underperforming almost every other major emerging market currency apart from the Ukraine hryvnia, according to Thomson Reuters data.
Investors have been particularly worried about perceptions of political influence on monetary policy after President Tayyip Erdogan has repeatedly called for lower interest rates and said that those who defend high rates are “traitors.”
Even as the lira’s fall risks stoking inflation, the central bank has held off from what economists say are much-needed rate increases, opting instead to employ more obscure policy tools in an attempt to defend the currency.
Zeybekci has previously said that Turkey should continue with “courageous interest rate cuts” and that interest rates, not food prices, were the main cause of its inflation.
The lira was slightly weaker on the day at 2.7235 to the dollar. Its most recent record low was 2.7435, hit Friday.

 

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