Turkey to use lira in property purchases, sales, rents

Turkey to use lira in property purchases, sales, rents

Later on Thursday, Turkey's central bank increased its one-week repo interest rate to 24 percent from 17.75 percent.

All 11 economists in a Reuters poll had forecast the bank would tighten, with the predictions ranging between 225-725 basis points as it balances concerns over the lira's weakness with worries about a sharp economic slowdown.

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

That dwarfs what the market was expecting in the region of around 300 to 500 bps. "This is the first time in recent memory that Turkey has delivered a hawkish surprise". In one direction it could hear the siren call of investors craving higher interest rates to draw a line in the inflationary sand and stop the lira's collapse.

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 per cent for the last month.

Ignoring calls for restraint from President Recep Tayyip Erdoğan, the bank raised its main short-term rate from 17.5% following weeks of pressure from worldwide investors. Economic orthodoxy suggests the opposite. By way of comparison, the Federal Reserve's much-debated rate hikes earlier this year nudged the rate just fractions of a percentage point to around 2 percent in the U.S.

Must give a lesson to those who exploit with price hikes.

In a speech to officials from his AK Party in Ankara, Erdogan said the sudden fall in the value of the Turkish lira in August was evidence of an "attempted economic assassination".

Inflation in Turkey is now nearly 20 percent and the crisis there has spread to some other emerging market countries with sizable current account deficits. "If you say 'inflation is cause, the rate is the result, ' you do not know this business, friend".

Erdogan has been a fierce opponent of raising rates and some investors in the Turkish economy had fears he could be interfering in the central bank's affairs.

"My sensitivities concerning interest rates are the same, nothing has changed", he said.

It was not immediately clear if Erdogan had been aware of the central bank's decision when he made his comments. It later shed some of those gains but was still up almost three percent in value at 6.16 to the dollar after 1330 GMT.

Ankara/Istanbul: In a remarkable display of choreography, Turkish President Recep Tayyip Erdogan banned the use of dollars in most contracts, railed against high borrowing costs and then stood back as his central bank announced the biggest rate hike of his rule. The sense of doom was compounded on August 1, when the United States imposed selective sanctions on Turkey over the detainment of an American pastor.