Turkey’s central bank gave advance notice of measures it may take at its April 22 meeting, a verbal intervention that has provided some respite for the lira.
Policy makers will discuss lowering the rate charged for foreign-currency loans, as well as a “measured” increase in payments to lenders for their required lira reserves, the bank said on its website Tuesday. The lira reversed losses after the statement, a rebound that gathered pace after the U.S. announced lower-than-expected retail sales figures.
While the statement didn’t mention a possible increase in the benchmark interest rate, it said “other measures to support the stability in financial markets” would be considered.
Persistent criticism from President Recep Tayyip Erdogan, who says excessively high interest rates are damaging the economy, means the bank has probably taken that option off the table as it seeks to bolster the lira, said William Jackson, emerging markets economist at Capital Economics in London.
“It’s apparent that the monetary policy committee isn’t willing to raise official policy rates,” Jackson said in e-mailed comments. Instead, it’s “looking for ways to tighten monetary conditions and shore up the lira without incurring the wrath of President Erdogan.”
The bank’s statement came after the currency fell to a record 2.6873 per dollar earlier on Tuesday. It recovered to 2.6656 per dollar at 4 p.m. in Istanbul, up 0.2 percent from the previous day’s close.
The central bank’s move to support the lira is “unlikely to turn the trend around,” Koon Chow, senior currency strategist at Union Bancaire Privee in London, said by e-mail.