Turkey vows to fight inflation, currency plunge after emergency meeting

The Turkish presidency said on Wednesday evening that the government will take necessary measures to reduce the exchange rate pressure and combat inflation.

The announcement came after an emergency meeting summoned by President Recep Tayyip Erdogan to discuss the currency collapse ahead of the snap elections in June.

Murat Cetinkaya, governor of Turkey's central bank, also attended the top economic meeting, which lasted two and a half hours, sparking speculation that the emerging market may take drastic measures such as a hike in interest rates.

A written statement published following the meeting, however, did not provide details about the measures.

Measures "will be taken in order to fight more effectively against inflation and to reduce interest and foreign exchange rates pressures," the statement said.

"There will be categorically no deviation from fiscal discipline which is one of the most important anchors of our economy," it added.

Official data show the inflation climbed to almost 11 percent in April, stoked by the tumble of the Turkish lira, which has lost more than 11 percent against the US dollar in 2018.

The Turkish government has "never fought the markets" and the central bank will continue to do what's needed, Deputy Prime Minister Mehmet Simsek said on Wednesday.

Erdogan last held an unscheduled meeting on the lira amid a market rout in November 2016, a day before the bank raised its late-liquidity window by 25 basis points.

Since then, it has pushed up average borrowing costs by more than 550 basis points.

A continued sharp depreciation of the Turkish currency would increase the chances of an emergency rate hike, said William Jackson, an emerging-market economist at Capital Economics.

Turkey's central bank raised the key rate by 75 basis points last month, and has moved to boost lenders' access to dollar liquidity, but the measures have proved insufficient to support the currency.

"A hike in interest rates is not a necessity but a must," said Enver Erkan, a senior analyst told Xinhua, stressing the need for Turkey's embattled economy to embark upon a path of structural reforms after the elections.

According to opinion polls, Erdogan is the clear favorite of the presidential race but his new administration would face serious hurdles if his ruling Justice and Development Party (AKP) loses its majority in Parliament against a unified opposition.

The faltering economy is widely seen as the main reason why Erdogan brought forward elections originally scheduled for November 2019.

A narrowly won referendum for controversial constitutional changes last year will shift Turkey from a nearly century-old parliamentary system to an executive presidency after the upcoming polls.

Erdogan aims to secure new powers to weather a coming storm in the economy which has always been his strongest point since first coming to power in 2003.

Despite an impressive 7.4-percent growth in 2017, the highest in G20 member countries, Turkey's economy has begun to run out of steam and show signs of overheating, according to specialists.

Last week, the international rating agency Standard and Poors further cut Turkey's rating, a move Ankara slammed as a political step ahead of elections.

The Turkish government has announced a controversial package of incentives and tax amnesty, increasing fears of overspending which would harm the fiscal discipline.

The government is also working on a new scheme to lure back the capital deposited abroad by Turks, Finance Minister Naci Agbal said on Wednesday.

"We want to encourage our citizens abroad to bring their assets back to Turkey," the minister said, adding that a "new cash repatriation scheme" aiming to bring back gold or foreign exchange-dominated assets would be launched soon.






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