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

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.


France ready to take Trump’s tariff threat to WTO

Updated 08 December 2019

France ready to take Trump’s tariff threat to WTO

  • Macron government will discuss a global digital tax with Washington at the OECD, says finance minister

PARIS: France is ready to go to the World Trade Organization to challenge US President Donald Trump’s threat to put tariffs on French goods in a row over a French tax on internet companies, its finance minister said on Sunday.

“We are ready to take this to an international court, notably the WTO, because the national tax on digital companies touches US companies in the same way as EU or French companies or Chinese. It is not discriminatory,” Finance Minister Bruno Le Maire told France 3 television. Paris has long complained about US digital companies not paying enough tax on revenues earned in France.

In July, the French government decided to apply a 3 percent levy on revenue from digital services earned in France by firms with more than €25 million in French revenue and €750 million ($845 million) worldwide. It is due to kick in retroactively from the start of 2019.

Washington is threatening to retaliate with heavy duties on imports of French cheeses and luxury handbags, but France and the EU say they are ready to retaliate in turn if Trump carries out the threat. Le Maire said France was willing to discuss a global digital tax with the US at the Organization for Economic Cooperation and Development (OECD), but that such a tax could not be optional for internet companies.

“If there is agreement at the OECD, all the better, then we will finally have a global digital tax. If there is no agreement at OECD level, we will restart talks at EU level,” Le Maire said.

He added that new EU Commissioner for Economy Paolo Gentiloni had already proposed to restart such talks.

France pushed ahead with its digital tax after EU member states, under the previous executive European Commission, failed to agree on a levy valid across the bloc after opposition from Ireland, Denmark, Sweden and Finland.

The new European Commission assumed office on Dec. 1.