Jun 12 2019

Turkish lira falls as investors nervously await rates decision

Turkey’s lira edged down on Wednesday as investors awaited a decision by the central bank on interest rates.

The lira dropped by 0.4 percent to 5.82 per dollar as of 12:45 p.m. in Istanbul. The central bank is due to make its announcement on interest rates at 2 p.m. local time.

Three of 25 economists polled by Bloomberg expect the central bank to lower its benchmark rate of 24 percent.

In April, the central bank dropped a commitment to raise interest rates if needed from a summary of its decision to keep rates on hold. Inflation in the country slowed to 18.7 percent in May from 19.5 percent the previous month, rendering a rate cut more likely. Annual price increases stood at 25.2 percent in October, a 15-year high.

Any reduction in interest rates would precede a rerun of an election for mayor of Istanbul, to be held on June 23. The government has called on banks to lower rates to stimulate economic growth.

The central bank raised its benchmark one-week repo rate by 625 basis points to 24 percent in September to stave off a currency crisis.

The lira lost 28 percent of its value last year and is down about 9 percent against the dollar this year. But the currency has rallied from as low as 6.25 per dollar in mid-May, easing pressure on inflation.

Still, many economists are urging the central bank to keep rates on hold, citing political uncertainty surrounding the Istanbul mayoral elections and a spat with the United States over Ankara's planned purchase of S-400 air defence missiles from Russia.