The lira reversed earlier gains after a doubling of interest rates failed to assuage concern that Turkey’s economy will be left exposed by a slowdown in China and a reduction in U.S. monetary stimulus. Stocks fell.
Turkey’s central bank raised all its main interest rates at an emergency late-night meeting in an effort to shore up the lira, resisting government pressure and reversing years of policy aimed at stoking growth.The Ankara-based bank increased the one-week repo rate to 10 percent from 4.5 percent, the overnight lending rate to 12 percent from 7.75 percent, and the overnight borrowing rate to 8 percent from 3.5 percent.
At the last regular policy meeting on Jan. 21, Basci left the three main interest rates unchanged, even after the lira had declined almost 7 percent in the previous month. He opted instead to introduce a fourth rate of 9 percent, to be used only days when the bank decides extra tightening is needed.
As the currency’s slide picked up pace last week, Basci intervened unannounced in markets for the first time in more than two years, selling about $3 billion. That only accelerated the slump, leading the bank to reassemble last night.