Turkey CB Delivers Massive Rate Hike Despite Erdogan's Calls For Cut

Erdogan appoints himself chairman of Turkey’s sovereign wealth fund

The move comes after the lira's drastic fall in value against the United States dollar last month during one of the worst diplomatic rows between North Atlantic Treaty Organisation allies Washington and Ankara. Wall Street was set to open higher on Friday, futures indicated.

Europe followed, with 0.2-0.6 per cent rises for German, French, Italian and Spanish shares offsetting a FTSE in London, which was being held back by weak oil and tobacco stocks. Japan's Nikkei stock index was 1.2 percent higher.

The benchmark Shanghai Composite index fell 0.2 percent while the blue-chip CSI 300 rose 0.2 percent.

World markets calmed after signs of movement in the U.S. But President Donald Trump tempered market expectations, tweeting on Thursday that Washington was "under no pressure to make a deal with China". The yen weakened 0.2 percent to 111.47 per dollar on the soothing trade noises.

Countering a trend popular within Turkey, especially within the retail sector, the government said any contracts previously made in foreign currency but which were now in effect must be converted into lira within 30 days. -China trade stand-off and ahead of major central bank meetings on Thursday, including emerging market trouble spot Turkey.

Independent experts say Turkey should increase rates to help stem the selling pressure on the currency, as higher returns would entice global investors.

The Central Bank of Turkey surprised positively today by hiking the 1-week repo rate by 625 basis points.

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Currency crises in both Turkey and Argentina have stoked fears of contagion over the past several weeks, hammering emerging market assets from Indonesia to India to South Africa.

The increase, which was higher than expected, boosted the lira by five percent against the dollar and may ease investor concern about Erdogan's influence on monetary policy.

The bank is also fighting a losing battle against inflation with annual consumer price inflation hitting 17.9 percent last month, its highest level since late 2003.

The Turkish chief despatched the forex down spherical 2 percent flawless two hours sooner than the bank's decision, rattling markets by vocally criticizing the central bank for missing inflation targets and reiterating his conception that ardour fee hikes trigger label increases.

"In order to ensure the budget balance by the end of the year, we will be generating 35 billion liras in savings".

Before the move by policy makers in Ankara Thursday, the run on the currency forced the central bank to deliver some tightening where it could.

The lira is down 38% against the dollar this year despite Thursday's slim gain. But inflation continues to rise, reaching almost 18 percent in August. USA crude fell 0.41 percent to $68.31 per barrel and Brent was last at $77.79, down 0.5 percent on the day.

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