Turkey's central bank has hiked its overnight lending rate after sharp falls in the lira but left its main policy rate on hold, moves that may not be sharp enough to draw a line under concern about its independence. David Pollard reports.
Slowing business, uncertainty on the political front - and rising inflation ... It's an unappetising menu for Turkish consumers. But double digit losses in the lira in recent years are even more unpalatable for investors. They wanted a major rate hike to support it - that they didn't get. (SOUNDBITE) (English) RESEARCH DIRECTOR AT IS INVESTMENT, SERHAT GURLEYEN, SAYING: "A very typical Turkish central bank move back to square one. Central bank was adopting high frequency liquidity management in previous years and now this is a similar move. We have a wider interest rate corridor and central bank is likely to give liquidity to market at the high end of the interest rate corridor." A central bank statement details hikes in two secondary rates. Its main, one-week repo rate was kept on hold. Double digits could also register on the inflation meter this year. But President Erdogan opposes higher borrowing costs. Economists seeking reassurance on the bank's independence feel short-changed. (SOUNDBITE) (English) RESEARCH DIRECTOR AT IS INVESTMENT, SERHAT GURLEYEN, SAYING: "We have a very unpredictable environment for Turkish banks. We expect Turkish lira to weaken further because of this move." As it did - the lira at one point touching just shy of 3.83 to the dollar ... After already losing around 8 per cent this year. The only way apparently down as the bank struggles with its fallout.