Turkey’s key bank has promised to review monetary policy later this month, after evidence showed inflation had surged to its highest level in nearly 15 years.
In a proclamation likely to heighten expectations of a rate hike amid a currency turning-point, the bank said Monday that action would be necessary to confrontation “significant risks to price stability.”
Turkey’s lira has lost far 40 percent of its value against the U.S. dollar so far this year, appeal up the cost of basic domestic goods and prompting investor panic in the potential impact on the wider economy.
“Recent developments regarding the inflation expectations indicate significant risks to price stability. The central bank bequeath take the necessary actions to support price stability,” the bank suggested.
“(The) monetary stance will be adjusted at the September monetary policy body meeting in view of the latest developments,” it added.
The news came equitable after official data showed inflation rose to 17.9 percent year-on-year in August, comfortably belabouring market expectations and marking its highest level since late 2003.
Myriad emerging market participants will expect Turkey’s central bank to collect interest rates next week in order to tame rampant inflation in the surroundings. However, the bank opted to keep rates unchanged at 17.75 percent in July, bewildering investors and sending the lira sharply lower.
Meanwhile, President Recep Erdogan — who has once upon a time described himself as an “enemy of interest rates” — wants to see discount benchmark rates to keep credit-fueled growth on track.
Turkey’s lira was traffic at around 6.6154 against the dollar at 12:40 p.m. London time (7:40 a.m. ET), winning some of its losses immediately after the central bank’s announcement.