Economics
Turkish Central Bank Rolls Out Backdoor Tightening to Boost Lira
- Central bank suspending one-week repo auctions as lira slumps
- Changes to reserves requirements aim to withdraw excess liras
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Turkey’s central bank stepped in to tighten the supply of liras on Thursday by raising borrowing costs for lenders and making a series of changes to reserve requirements in an attempt to bolster the country’s battered currency.
The regulator is ceasing to provide liquidity at its cheapest rate of 24 percent by suspending one-week repo auctions, a decision it attributed to volatility in financial markets. The move effectively raises the cost of funding by 150 basis points without an official increase in the benchmark interest rate.