Turkey keeps main interest rate unchanged

At one point during a US-Turkey row last year, the Turkish lira traded to lows of around seven against the dollar. Above, a woman passes next to a board displaying US dollar and euro exchange rates in Turkish lira, in Istanbul. (AFP)
Updated 16 January 2019
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Turkey keeps main interest rate unchanged

  • The Turkish lira, which has been trading at more than 5.5 against the dollar, gained over one percent to 5.3 after the announcement that the main interest rate would remain unchanged
  • Turkey’s central bank said its policy committee ‘decided to maintain the tight monetary policy stance until the inflation outlook displays a significant improvement’

ANKARA: Turkey kept its main interest rate unchanged for a third time since a dramatic hike in September, in line with market expectations and helping the lira rally against the dollar.

The central bank said in a statement on its website that the one-week repo rate would remain at 24 percent. Inflation in Turkey remains in double-digits.

The Turkish lira, which has been trading at more than 5.5 against the dollar in the past couple of weeks, gained over one percent to 5.3 after the announcement.

The consensus had been for the rate to stay at 24 percent amid fears a cut would cause further weakness in the lira.

The bank said its policy committee “decided to maintain the tight monetary policy stance until the inflation outlook displays a significant improvement.”

It added that “if needed, further monetary tightening will be delivered.”

Consumer price inflation hit 25.24 percent in October, the highest level since 2003, before falling to 20.3 percent in December.

Turkey suffered a currency crisis in August during a diplomatic spat with the United States over the detention of an American pastor, later released, as well as concerns over domestic monetary policy under Turkish President Recep Tayyip Erdogan.

Erdogan has railed against high interest rates, describing them as the “mother and father of all evil.”

At one point during the US-Turkey row, the lira traded to lows around seven against the dollar.

But after the lira’s dramatic fall in the summer, the bank made an aggressive rate hike in September of 625 basis points (6.25 percentage points) to 24 percent.

Economists including Inan Demir of Nomura expected the central bank to keep the rate constant but London-based Capital Economics had warned of a potential 50 bps cut.

Demir said before the announcement the case for a cut had been “weakened” by fresh US-Turkey tensions over a Washington-backed Syrian Kurdish militia Ankara views as terrorists.

Although the dispute has since eased, US President Donald Trump on Sunday warned Washington would “devastate Turkey economically” if Ankara attacked the Kurdish People’s Protection Units militia (YPG) in Syria.


Tesla rolls out Model 3 in China ahead of schedule in sales push

Updated 37 min 2 sec ago
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Tesla rolls out Model 3 in China ahead of schedule in sales push

  • The initial deliveries will go to customers who placed their orders before the end of 2018
  • Tesla currently imports all the cars it sells in China, but is in the process of building a factory in Shanghai

BEIJING/SHANGHAI: Tesla has started delivering Model 3 cars in China slightly ahead of schedule, as it looks to revive its sales that have been hit hard by Sino-US trade tensions.
The California-based firm has already adjusted prices and added a cheaper Model 3 variant to its line-up to make its US-made cars more affordable in China amid high import tariffs.
The US luxury electric vehicle said in a statement that it held a delivery event in Beijing on Friday which “marked a significant milestone for the market.”
It had initially projected a March start for Model 3 deliveries in China — the world’s biggest auto market where overall car sales contracted in 2018 for the first time in more than two decades.
The initial deliveries will go to customers who placed their orders before the end of 2018, Tesla said. Buyers that ordered this year will start receiving their cars from end-March.
“I see its earlier-than-expected delivery as an effort to try and seize the market as quickly as possible” amid mounting competition, said Alan Kang, an analyst at LMC Automotive.
“Many of its potential customers will not only be considering Tesla’s Model 3 but also other electric car models like Jaguar’s I-PACE or that from Audi and Mercedes-Benz,” the Shanghai-based analyst added.
While auto sales in China have waned as the economy slowed, Tesla’s business was hit hard after Beijing raised tariffs on US auto imports to 40 percent in July amid the trade tensions. China has since temporarily suspended the additional 25 percent tariff, reducing it to the 15 percent level.
Tesla currently imports all the cars it sells in China, but is in the process of building a factory in Shanghai that will manufacture Model 3 cars in the initial phase and help it minimize the impact of the trade war.
The United States and China are in the midst of talks aimed at resolving their trade dispute. If the two sides fail to reach an agreement by March 1, US tariffs on $200 billion worth of Chinese imports are set to spike to 25 percent from 10 percent.
Tit-for-tat tariffs between the world’s two top economies have upended international trade flows.
Tesla’s earlier-than-scheduled delivery, however, comes as the automaker was dealt a setback on Thursday after Consumer Reports, an influential US magazine, withdrew its endorsement for Model 3, citing reliability problems.
The magazine’s decision to withdraw its endorsement, less than nine months after recommending the electric sedan, raised questions about quality that Tesla has faced since the Model 3’s difficult launch.