ISTANBUL: Turkish assets firmed yesterday one day before the central bank in Ankara holds an interest-rate-setting meeting and with investors expecting the European Central Bank (ECB) to loosen monetary policy as soon as next week.
ECB chief Mario Draghi said late last week that the central bank was prepared to respond with all its “available” tools should inflation drop further.
Turkey’s large current account deficit is financed by foreign capital inflows, making it especially sensitive to global liquidity conditions.
Speculation about when the US Federal Reserve would raise interest rates and whether the ECB would loosen policy have contributed to lira volatility in recent months. Investors are also unsettled by violence in nearby Ukraine, Syria and Iraq.
Still, the lira firmed against the dollar to 2.1740 by 0810 GMT from 2.1777 late yesterday.
Istanbul’s main share index rose 1.04 percent to 80,089.95, outperforming a 0.02 percent fall in the broader emerging markets index. The benchmark 10-year government bond yield fell to 9.29 percent from 9.40 percent on Monday.
The Turkish central bank’s monetary-policy committee, which holds its monthly meeting on Wednesday, is under pressure to counter excessive movements in the lira exchange rate and keep inflation under control. Yet it also faces calls from the ruling AK Party to cut rates to protect growth.
A Reuters poll of 20 banks found 13 expected the central bank to leave its main weekly repo rate at 8.25 percent on Wednesday. Six predicted a 0.25 percent cut, and one expected a cut of half a percent. None saw a change in the 12 percent overnight lending rate.
Prime minister and president-elect Tayyip Erdogan has long pushed for sharper cuts in interest rates but, earlier this month, the central bank said the inflation forecasts from its monthly survey had increased.
Deputy Prime Minister Ali Babacan called a meeting of Turkey’s top economic policymakers on Sept. 2 to prepare and issue a fresh mid-term plan for 2015 to 2017.
Reuters
