Turkey’s central bank promises action after inflation surges to 18%

The comments from Turkey’s central bank underscore the volatile outlook for prices amid a currency crisis. (Reuters)
Updated 03 September 2018
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Turkey’s central bank promises action after inflation surges to 18%

  • The lira has lost 40 percent of its value against the dollar this year
  • President Recep Tayyip Erdogan wants to see lower borrowing costs

ANKARA: Turkey’s central bank said it would adjust its monetary stance given “significant risks” to price stability, a rare move to calm financial markets after inflation surged to its highest in nearly a decade and a half on Monday. The comments from the central bank underscore the volatile outlook for prices amid a currency crisis. The lira has lost 40 percent of its value against the dollar this year, driving up the cost of goods from potatoes to petrol and sparking alarm about the impact on the wider economy and the banking system.
Inflation jumped 17.9 percent year-on-year in August, official data showed, outstripping market expectations and marking its highest level since late 2003.
“Recent developments regarding the inflation outlook indicate significant risks to price stability. The central bank will take the necessary actions to support price stability,” the bank said in a statement.
“(The) monetary stance will be adjusted at the September monetary policy committee meeting in view of the latest developments.”
For investors, the main question has been whether the central bank will be able to sufficiently hike interest rates at its next policy-setting meeting on Sept. 13 to tame inflation. It left rates on hold at its last meeting in July, confounding expectations and sending the lira sharply weaker.
President Recep Tayyip Erdogan, a self-described “enemy of interest rates,” wants to see lower borrowing costs to keep credit-fueled growth on track. Investors, who fear the economy is set for a hard landing, want big rate hikes.
Finance Minister Berat Albayrak told Reuters in an interview on Sunday that the bank was independent of the government and would take all necessary steps to combat inflation. He also promised a “full-fledged fight” against inflation.
By signalling that it was ready to take action, the central bank may now have inadvertently set financial markets up for disappointment if it doesn’t deliver a hefty increase, said Piotr Matys, an emerging markets forex strategist at Rabobank.
“A proper rate hike is required and by making a pledge to raise interest rates, the central bank may have raised the bar for itself to exceed expectations on Sept. 13,” Matys said. “The central bank basically has no room to disappoint.”
The lira briefly recovered some losses immediately after the central bank’s announcement. By 0852 GMT it was more than 1 percent weaker on the day at 6.6200 to the dollar.
The bank is likely to deliver a rate hike of 2 percentage points on Sept. 13, far short of the 7-10 percentage points that investors would like to see, said Jason Tuvey of Capital Economics in a note to clients.
Such increases are needed “to bring real interest rates back to positive territory and reassure the markets that policymakers are willing and able to tackle high inflation,” he said.


Tesla rival Lucid Motors wants to build factory in Saudi Arabia

Updated 20 February 2019
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Tesla rival Lucid Motors wants to build factory in Saudi Arabia

  • Lucid Motors eyes production plant in Kingdom after raising more than $1bn from the Public Investment Fund
  • California-based electric-car maker hopes to sell first vehicles for more than $100,000 

LONDON: A US-based electric-vehicle company that raised more than $1 billion from Saudi Arabia wants to build a factory in the Kingdom, and says its mission to build “the best car in the world” is well underway. 

The California-based Lucid Motors is developing its first model, the Air, which it hopes to sell for more than $100,000 when it enters production in less than two years’ time. 

Financial backing from Saudi Arabia’s Public Investment Fund (PIF), announced last year, will allow Lucid to proceed with the development of the all-electric sedan, as well as fund the $240 million cost of building the first phase of its factory in the US.

Peter Rawlinson, chief technology officer at Lucid Motors — and a former engineer at rival Tesla — said the company wants to eventually build a production plant in Saudi Arabia, and sees a “long-term” partnership with the Kingdom.

“I can see a really bright future, with a tangible manufacturing facility or facilities,” Rawlinson told Arab News.

“We’d love to do that … We’re currently in a period where we are investigating all these options. 

“There is a vision that there will be some sort of production facility in the future.”

Rawlinson added that it is “early days” for such a plan, but said he sees many opportunities for electric vehicles in Saudi Arabia — not least, because of the abundant sunshine and potential for solar power.

“We are undertaking the appropriate studies, but I’m really excited about the potential of this. This partnership is huge for us; we can benefit the Kingdom of Saudi Arabia in a significant, meaningful and long-term manner,” he said. 

“One of the great assets of the Kingdom is its endless reserves of sunshine, and how that can be harvested with solar energy. We’re a battery-storage technology company; that’s a way we could contribute. We’re exploring a number of avenues along those lines.”

Lucid is positioning itself in the luxury market, and Rawlinson said its Air model is looking to compete with the likes of the Mercedes-Benz S-Class. The Lucid Air is the company’s first car, but Rawlinson said an initial public offering (IPO) could be on the cards to develop future models.

The engineer brushed off the idea of a competitive threat from Elon Musk’s Tesla, where he once worked as chief engineer for the Model S.

“We don’t see Tesla as a key, direct competitor. We see the German gasoline cars — the petrol engine cars … as our core competitive set,” he said. 

“I’ve spoken to many people … who would gladly buy an electric car but say they’re not going to give up their Mercedes-Benz to buy a Tesla because of the interior. You’ve only got to step inside a Tesla to realize it’s not true luxury.”