Turkey stuns market with massive interest rate hike

Turkish President Erdogan makes a speech during a meeting in Ankara. (Reuters)
Updated 13 September 2018
0

Turkey stuns market with massive interest rate hike

  • Annual consumer price inflation in Turkey hit 17.9 percent in August
  • Under pressure lira rallies on rate hike

ISTANBUL: Turkey’s central bank raised its benchmark rate by 625 basis points on Thursday in a move that boosted the lira and may ease investor concern about President Tayyip Erdogan’s influence on monetary policy.
The bank raised the one-week repo rate to 24 percent, meaning it has now increased interest rates by 11.25 percentage points since late April, in an attempt to put a floor under the tumbling lira.
The decision came despite Erdogan repeating his opposition to high interest rates earlier in the day, saying high inflation was a result of the central bank’s wrong steps.
The central bank said deterioration in pricing behavior continued to pose upside risks on the inflation outlook, despite weaker domestic demand conditions.
“Accordingly, the Committee has decided to implement a strong monetary tightening to support price stability,” the monetary policy committee statement said.
All 11 economists in a Reuters poll forecast the bank would tighten, but with the rate hike predictions ranging between 225-725 basis points as the bank balances concerns over lira weakness with worries about an economic slowdown.
“It is pleasing to see common sense prevail,” said Aberdeen Standard Investments Head of Emerging Market Debt, Brett Diment. “Hiking today does get Turkey on the slow road to recovering some monetary policy credibility, and that is critical.”
The lira firmed to 6.01 against the dollar following the decision, from more than 6.4176 beforehand.
The currency has lost 40 percent of its value against the dollar this year, hit by concerns about Erdogan’s influence on monetary policy and more recently by a diplomatic spat between Turkey and the US.
Erdogan, a self-described “enemy of interest rates,” assumed new powers under an executive presidential system following an election in June and has appointed his son-in-law as finance minister.
The appointment of Berat Albayrak boosted expectations the president — who wants to see lowering borrowing costs to spur credit growth and new construction — will look to exercise greater influence over monetary policy.
In August, annual consumer price inflation hit 17.9 percent, its highest level since late 2003, prompting the central bank to say it would adjust its monetary stance at the September meeting in the face of “significant risks” to price stability.
Against expectations, the central bank did not raise rates at its last meeting in July. Subsequently, the lira lost some 25 percent of its value while Turkish authorities have taken a series of steps designed to support the currency, with the central bank taking liquidity measures and the banking watchdog limiting derivative transactions.
Erdogan has cast the lira crisis as an ‘economic war’ targeting Turkey, repeatedly urging Turks to sell their dollar savings to shore up the lira.
In a decision announced earlier on Thursday, he ruled that property sales and rental agreements must be made in lira, putting an end to such deals in foreign currencies.


Europol warns on Daesh cyber threat

Updated 1 min 17 sec ago
0

Europol warns on Daesh cyber threat

LONDON: Daesh followers could be seeking cyber-attack tools from the so-called ‘digital underground,’ according to a new report from Europol.
With Daesh forces having lost most of their territorial strongholds in the Middle East since 2016, the terror organization has increasingly retreated to the web to continue its campaign.
The annual report published on Tuesday looks at current and anticipated threats in cybercrime across the globe, and comes just as the Syrian war seems to be entering its final stage with the last militant rebel fighters holding up in the province of Idlib.
Daesh had already become well-known for using encrypted messaging apps and the ‘dark web’- an area of the Internet not accessible to search engines — to promote itself and recruit new members to its organization.
Europe’s law enforcement agency’s report now suggests that Daesh may also considering the use of cyber-attacks and using the ‘dark web’ to buy illicit malware.
“There has been much concern and speculation over the past few years that terrorists could turn to launching cyber-attacks against critical infrastructure,” the report said.
Daesh-affiliated groups have only managed to carry out a handful of “low-level” cyberattacks in the last year, the report found, including the hacking of a Swedish radio station last year when the attacker managed to play out an IS song on air, the report said.
In March this year, Daesh supporters also attempted to set up an alternative to the social networking platform Facebook, called the “Muslim’s Network.”
While concerns are growing, Europol said the organization’s current cyber-crime abilities remain in their “infancy.”
Daesh is also far more likely to buy cyber-attack tools that use malware or ransomware technology, rather than develop their own tools yet, the report found. 

“While IS sympathizers have demonstrated their willingness to buy cyber-attack tools and services from the digital underground, their own internal capability appears limited,” the report read.
“While terrorist actors are aggregating open- source tools, they have yet to develop their own,” it added.
Extremist networks have also experimented with cryptocurrencies as a means of moving funds across borders, the report said.
Europol highlighted IS-affiliated websites calling for donations of the virtual currency Bitcoin last November.
As yet, no on-the-ground attack carried out in Europe has been funded with virtual currency, the report found, with financing still mainly coming from the conventional banking system and money remittance services.
The report recommended that efforts must be made to disrupt Daesh’s online propaganda in order to hinder the group’s “access to human expertise, funding and cyber tools.”
In July, a survey of academics specializing in cyberterrorism found that just over two-thirds of respondents thought cyberterrorism constituted a “significant threat.”
However, Stuart Macdonald, professor of law and criminology at Swansea University and author of the Cyberterrorism Project report told Arab News that there were differences surrounding the definition of cyberterrorism.
Cyberterrorism could potentially covering an attack that resulted in killing a huge number of people or it could just involve shutting down a website for a few hours, he said.
“But overall most agree that vulnerabilities exist in critical infrastructure. Where opinions tend to differ is whether terrorists have the capability to perpetrate acts of cyberterrorism and are motivated to commit acts of cyberterrorism as opposed to more traditional forms of physical attack.
“Some researchers believe that terrorists are likely to prefer traditional physical attacks, as these are more headline-grabbing and generally less expensive,” he said.