Turkish central bank unleashes big interest rate hike in another sign of an economic shift

Special Turkish central bank unleashes big interest rate hike in another sign of an economic shift
Turkish Treasury and Finance Minister Mehmet Simsek, left, and Turkish Foreign Minister Hakan Fidan at the Presidential Complex, Ankara, Aug. 21, 2023. (AFP)
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Updated 25 August 2023
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Turkish central bank unleashes big interest rate hike in another sign of an economic shift

Turkish central bank unleashes big interest rate hike in another sign of an economic shift
  • The bank’s key interest rate increased by 7.5 percentage points to 25 percent but some experts say it will not enough to ease inflation and end a cost-of-living crisis
  • Turkiye’s currency gained as much as 6% against the dollar after President Recep Tayyip Erdogan followed up the announcement by expressing confidence in his finance team

ANKARA: Turkiye’s central bank raised its key interest rate by an aggressive 7.5 percentage points on Thursday, a larger-than-expected hike that further signaled a return to more traditional economic policies under President Recep Tayyip Erdogan.

The bank increased its policy rate to 25 percent as it continued to backtrack from the previous rate-cutting course set by Erdogan, which is blamed for fueling a cost-of-living crisis that left many households struggling to afford rent and basic goods as inflation surged.

“Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved,” the central bank said.

Selva Demiralp, a professor of economics at Koc University in Istanbul, said that normally, interest rate increases slow the economy and can even cause a recession.

“Yet in Turkiye we are discussing whether the larger-than-anticipated rate hike could control a downturn,” she told Arab News.

“This is a properly designed question. That is because the low interest rate environment pretty much froze credit growth.”

The upper limit on commercial loans was also increased, to more than 56 percent. Demiralp said that by allowing banks to set deposit and loan rates more competitively, credit flow could resume, albeit at higher interest rates.

But she and some other experts warned that the interest rate increase alone is unlikely to be sufficient or durable enough to resolve the problems, and so additional determined moves are needed to help curb rebounding inflation and correct long-running economic woes.

“I see it as a first signal that the new members of the PPK (Monetary Policy Committee) of the central bank were able to implement a more hawkish stance and convince the president that this is better for the economy,” said Demiralp.

“Our year-end inflation forecast is close to 70 percent. In that environment, a 25 percent policy rate still implies a very negative real interest rate and won’t be sufficient. What is critical is the continuation of the hawkish tone that we have witnessed today.”

Nick Stadtmiller, head of product at research company Medley Advisors in New York, agreed that the rate increase is a step in the right direction but he does not believe it will be sufficient to reduce inflation.

“I think rates would need to rise at least to 40 percent in order to have a big impact on price growth,” he told Arab News. “Rates that are sufficiently high to reduce inflation will slow economic growth and reduce credit demand.

It is difficult to see how policymakers can cut inflation while at the same time stimulating growth in corporate demand, which is their stated goal, he added.

“The other problem is that the gradual approach to tightening policy ultimately means they will have to raise rates later by even more in order to cut inflation down,” Stadtmiller said.

“Many other central bankers around the world have said in recent years that increasing rates quickly will allow them to raise rates by less over the entire cycle. The opposite is also true: Raising rates slowly means you have to reach a higher terminal rate at the end to have a similar impact.”

It would not be a surprise if the central bank now pauses and takes a few months to assess the effects of the rate hike before taking further action, he added.

“With corporate-loan growth near zero, policymakers may want to see the impact on the economy before tightening more,” Stadtmiller said.

Turkiye’s struggling currency, the lira, surged on Thursday in response to the interest rate increase. It gained as much as six percent against the dollar after Erdogan followed up the announcement by expressing strong confidence in his finance team.

“We are taking determined steps to address the problems caused by inflation,” the president said in nationally televised remarks.

In a message posted on social media, Finance Minister Mehmet Simsek wrote: “We are determined. Price stability is our top priority.”


US and Britain strike Houthi rebel targets in Yemen after surge in shipping attacks

US and Britain strike Houthi rebel targets in Yemen after surge in shipping attacks
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US and Britain strike Houthi rebel targets in Yemen after surge in shipping attacks

US and Britain strike Houthi rebel targets in Yemen after surge in shipping attacks

WASHINGTON: The US and Britain struck 13 Houthi targets in several locations in Yemen on Thursday in response to a recent surge in attacks by the Iran-backed militia group on ships in the Red Sea and Gulf of Aden, three US officials said.

According to the officials, American and British fighter jets and US ships hit a wide range of underground facilities, missile launchers, command and control sites, a Houthi vessel and other facilities. The officials spoke on condition of anonymity to provide early details of an ongoing military operation.

Also struck were eight uncrewed aerial vehicles in Houthi-controlled areas of Yemen that were determined to be presenting a threat to US and coalition forces.

The strikes come a day after a US MQ-9 Reaper drone went down in Yemen, and the Houthis released footage they said showed the aircraft being targeted with a surface-to-air missile in a desert region of Yemen’s central Marib province. It marked the third such downing this month alone.

 


Houthi leader says 129 ships attacked during Red Sea campaign

Houthi leader says 129 ships attacked during Red Sea campaign
Updated 30 May 2024
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Houthi leader says 129 ships attacked during Red Sea campaign

Houthi leader says 129 ships attacked during Red Sea campaign
  • US Central Command says its forces destroyed new wave of drones and missiles fired by the militia

AL-MUKALLA: The leader of Yemen’s Houthi militia, Abdul Malik Al-Houthi, said on Thursday that his forces had attacked 129 ships in international waters since the start of their campaign in November, claiming that his group has resisted political and economic pressure to cease targeting ships.

“There are no political, economic, or other factors that might influence our activities,” he said in a televised speech. 

The militia has launched 27 ballistic missiles and drones in 12 operations against 10 ships in the Red Sea, Indian Ocean, and Mediterranean during the last seven days, Al-Houthi said, who disputed previous media reports that the militia had reduced its maritime strikes.

“Our actions have not decreased, but there has been a decrease in navigation and ship movement on the American and British sides, as well as a near-complete absence of Israeli activity.”

The Houthi leader’s threat to continue attacking ships came as the US Central Command announced on Thursday morning (Yemen time) that its forces had destroyed a new wave of drones and missiles fired by the Houthis over the international seas off Yemen, as well as foiled Houthi missile launches by destroying launchers.

The US military said it destroyed two missile launchers in a Houthi-controlled area of Yemen on Tuesday night.

On the same day, the Houthis fired two anti-ship ballistic missiles over the Red Sea from areas under their control, and neither the US-led coalition nor foreign commercial ships were targeted.

Two drones fired by the Houthis in Yemen over the Red Sea were intercepted by US forces before reaching their targets on Wednesday morning.

“It was determined these missiles and systems presented an imminent threat to US, coalition forces, and merchant vessels in the region. These actions are taken to protect freedom of navigation and make international waters safer and more secure,” the US military said in a statement. 

Hours before the US military statement, the Houthis claimed on Wednesday night to have shot down another US military MQ-9 Reaper drone over the central province of Marib, shortly after locals shared images and videos on social media of what appeared to be a downed Reaper drone in the province’s desert. 

The drone was engaged in a “hostile mission” above Marib when a “locally made” surface-to-air missile struck it on Wednesday morning, the Houthis said.

This is the sixth time the Yemeni militia has claimed to have shot down an MQ-9 Reaper drone since the start of their Red Sea operation and the third in May.

The Houthis’ Red Sea activities resulted in the loss of one commercial ship, the capture of another, and the targeting of scores more ships in international maritime channels and pushed shipping companies to forgo the Suez Canal via the Red Sea in favor of longer and more costly routes across Africa.

Meanwhile, the Aden-based central bank sanctioned six Yemeni banks on Thursday for failing to follow an earlier directive to relocate their activities from Houthi-controlled Sanaa to government-controlled Aden.

The central bank ordered Yemeni banks and other financial institutions to stop doing business with Tadhamon Bank, Yemen Kuwait Bank, Shamil Bank of Yemen and Bahrain, Al-Amal Microfinance Bank, Al-Kuraimi Islamic Microfinance Bank, and International Bank of Yemen for dealing with the Houthis, which the Yemeni government and other countries consider terrorists, and not relocating their headquarters to Aden.

The central bank also instructed Yemen’s public and financial institutions to deposit all banknote denominations issued before 2016 at the central bank and other commercial banks in government-controlled areas of Yemen within 60 days.

The economic war between the Yemeni government and the Houthis has escalated since 2016 when the government shifted the central bank’s offices from Sanaa to Aden.

The Houthis replied by ceasing to pay public workers in regions under their control, banning the circulation of banknotes printed by the Yemeni government in Aden, and targeting oil terminals in government-controlled Shabwa and Hadramout. 


Israeli airstrike on Rafah kills 12 Palestinians, Gaza medics say

Israeli airstrike on Rafah kills 12 Palestinians, Gaza medics say
Updated 30 May 2024
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Israeli airstrike on Rafah kills 12 Palestinians, Gaza medics say

Israeli airstrike on Rafah kills 12 Palestinians, Gaza medics say
  • Israel says more fighting in central, northern and southern Gaza
  • Head of UNRWA calls for end to Israeli attacks on staff and buildings

JERUSALEM: Israeli forces killed at least 12 Palestinians in a dawn airstrike on Rafah in southern Gaza on Thursday and fighting raged in several other areas of the coastal enclave, Gaza medics said.
Israel pressed on with its offensive on Rafah a day after saying its forces had taken control of a buffer zone along the nearby border between the Gaza Strip and Egypt, giving it effective authority over Gaza’s entire land frontier.
It said the buffer zone’s capture had cut off a route used by the Palestinian Islamist militant group Hamas to smuggle arms into Gaza during more than seven months of war, which has laid waste to much of the territory and raised fears of famine.
Gaza medical sources said the 12 Palestinians, whom it said were civilians, had been killed and an unspecified number of others wounded in an Israeli airstrike as they tried to recover the body of a civilian in the center of Rafah.
Another Palestinian civilian was killed in an airstrike on Al-Shati refugee camp west of Gaza City in the north of the densely populated enclave, the medics said.
Israel reported clashes in southern, central and northern Gaza but did not immediately comment on the reported deaths in Rafah, where hundreds of thousands of displaced Palestinians took refuge earlier in the war.
Israel has kept up raids on Rafah despite an order by the International Court of Justice (ICJ), the top UN court, to halt its attacks. Israeli forces say they are trying to root out Hamas fighters and rescue hostages being held there, and the ICJ also called for the release of hostages held in Gaza by Hamas.
More than 36,000 Palestinians have been killed in Israel’s air and land war in Gaza, with 53 of those killed in the past 24 hours, the Hamas-run enclave’s health ministry said.
Israel launched its offensive after Hamas fighters crossed from Gaza into southern Israel on Oct. 7 last year, killed 1,200 people and abducted more than 250, according to Israeli tallies.
The Israeli military said a soldier had been killed in fighting in northern Gaza, bringing to 292 Israel’s combat losses since its first Gaza ground incursion on Oct. 20.

TUNNELS, ARMS AND EXPLOSIVES
In an overnight call with US Secretary of Defense Lloyd Austin, Israeli Defense Minister Yoav Gallant underlined the continuing importance of Israeli operations in the Rafah area “due to concrete information regarding hostages held there.”
“Minister Gallant detailed IDF activities in the Rafah area where 20 terror tunnels have been identified,” the Israeli Defense Ministry said in a statement on the overnight call.
The Israeli military also said in a statement that tunnels used by Hamas for smuggling and moving fighters underground had been discovered during the latest raids, as well as large amounts of arms and explosives.
The Israeli statements did not say where the smuggling tunnels ran from. An Israeli official said on May 15 there were 50 tunnels connecting Rafah to the Sinai in Egypt, and voiced concern that Hamas could use them to smuggle senior operatives or hostages into Egyptian territory. Egypt on Wednesday denied the existence of any such tunnels.
The United States, Israel’s closest ally, reiterated its opposition to a major ground offensive in Rafah on Tuesday but said it did not believe such an operation was under way.
The US has, with Egypt and Qatar, been involved in efforts to mediate indirect talks between Israel and Hamas on arranging a ceasefire and the release of the remaining hostages. Those talks have stalled, with both sides blaming the other for the lack of progress.
As the war drags on, malnutrition has become widespread in Gaza as aid deliveries have slowed to a trickle, and the United Nations has warned of incipient famine.
Philippe Lazzarini, head of the UN agency for Palestinian refugees (UNRWA), also called for an end to what he said were Israeli attacks on UNRWA staff and buildings in Gaza.
In article for the New York Times, he said Israeli officials were “delegitimizing UNRWA by effectively characterizing it as a terrorist organization,” and he described a “dangerous precedent of routine targeting of UN staff and premises.”
His comments followed allegations by Israel in January that 12 of UNRWA’s 13,000 staff in Gaza took part in the Oct. 7 attack on Israel. Israel did not immediately respond to his remarks.
The Gaza war has also stoked violence in the Israeli-occupied West Bank, another territory where Palestinians seek statehood.
Israel said two soldiers were killed in an overnight hit-and-run by a Palestinian motorist in the West Bank city of Nablus. There was no immediate claim of responsibility from Palestinian factions.


Aggression against Gaza represents a turning point in history of region: Arab League chief

Arab League chief speaks at a press conference during the 10th Ministerial Conference of the China-Arab States Cooperation Forum
Arab League chief speaks at a press conference during the 10th Ministerial Conference of the China-Arab States Cooperation Forum
Updated 30 May 2024
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Aggression against Gaza represents a turning point in history of region: Arab League chief

Arab League chief speaks at a press conference during the 10th Ministerial Conference of the China-Arab States Cooperation Forum
  • Aboul Gheit said that the Arab League was committed to making all efforts to build a promising future for both Arab and Chinese societies

CAIRO: Arab League Secretary-General Ahmed Aboul Gheit said that the aggression against Gaza for more than eight months “marks a turning point in our region’s history.”

He said that there was “a deep sense of frustration over the international community’s inability to halt this massacre.”

Aboul Gheit was speaking at the opening session of the 10th ministerial meeting of the China-Arab States Cooperation Forum in Beijing.

The forum —  founded in 2004 in Cairo — includes members of the Arab League. 

Chinese President Xi Jinping delivered the keynote address at the opening ceremony.

Leaders from Bahrain, Egypt, Tunisia and the UAE were also present.

Aboul Gheit said: We value China’s role and steadfast support for the just cause of the Palestinian people, their right to self-determination and the establishment of their independent state.”

He urged China, as a permanent member of the UN Security Council, to play a more significant role in reinforcing the global consensus on the two-state solution, leading to a reliable and irreversible path to establishing an independent Palestinian state along the June 4, 1967, borders, with East Jerusalem as its capital.

Aboul Gheit said that the Arab League and its member states aimed to enhance regional stability by working to contain existing crises, settle them peacefully, and reduce escalation through balanced relations with neighboring countries based on non-interference in internal affairs and mutual respect.

He reaffirmed the league’s support for China’s sovereignty and territorial integrity, maintaining a firm commitment to the one-China principle.

Aboul Gheit said that the Arab League was committed to making all efforts to build a promising future for both Arab and Chinese societies.

“We aim to advance the strategic partnership between the Arab countries and China for a better future, strengthening cooperation mechanisms and finding political solutions to issues of mutual concern on regional and international fronts.”

Aboul Gheit said that China had “an illustrious presence in world history that we deeply respect and appreciate. Its profound influence on the world’s present and future is evident and highly valued. Moreover, China’s experience achieving renaissance and progress is greatly admired in our Arab world.”

The Arab League chief said: “Today, we celebrate the 20th anniversary of establishing the China-Arab States Cooperation Forum. 

“This forum marked a significant milestone in the history of relations between the two sides, placing these relations within a comprehensive institutional framework, thus ensuring their development and future potential.

“Since its inception, the forum has become a success story in international multilateral cooperation, evidenced by the various mechanisms, memorandums and frameworks it has produced to facilitate collaboration across political, economic, social and development fields.” 

Aboul Gheit said that the first Arab-Chinese summit in Riyadh, Saudi Arabia, in 2022 marked a qualitative shift in Arab-Chinese relations.

This summit signaled the beginning of a pivotal phase in the history of relations between the Arab world and China.

“The outcomes and agreements from this summit laid a strong foundation for mutual benefit, and we are committed to continuing efforts to implement them,” Aboul Gheit said.

He called for institutionalizing the Arab-China summit and holding regular sessions to enhance progress and allow for continuous monitoring and development of cooperation programs.


Child malnutrition at ‘emergency levels’ in Sudan: UN

Child malnutrition at ‘emergency levels’ in Sudan: UN
Updated 30 May 2024
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Child malnutrition at ‘emergency levels’ in Sudan: UN

Child malnutrition at ‘emergency levels’ in Sudan: UN
  • “The lives of Sudan’s children are at stake and urgent action is needed to protect an entire generation from malnutrition, disease and death,” the UNICEF, WHO and WFP said
  • “The ongoing hostilities are worsening the drivers of child malnutrition“

ROME: Three UN agencies warned Thursday of a “significant deterioration” in the nutrition situation of children and mothers in war-torn Sudan, calling for “urgent action.”
“The lives of Sudan’s children are at stake and urgent action is needed to protect an entire generation from malnutrition, disease and death,” the United Nations children’s agency (UNICEF), the World Health Organization (WHO) and World Food Program (WFP) said in a statement.
Sudan has been in the throes of conflict for over a year between the regular army led by de facto ruler Abdel Fattah Al-Burhan and the RSF led by his former deputy, Mohamed Hamdan Dagalo.
The conflict has killed tens of thousands of people, including up to 15,000 in a single West Darfur town, according to UN experts.
Nearly nine million people have been forced from their homes.
“The ongoing hostilities are worsening the drivers of child malnutrition,” the agencies said.
“These include a lack of access to nutritious food, safe drinking water and sanitation, and increased risk of disease,” they added.
“Sudan is facing an ever-increasing risk of conflict-induced famine that will have catastrophic consequences including the loss of life, especially among young children.”
The agencies said the conflict “is also severely impacting the delivery of humanitarian supplies, leaving countless women and children without access to vital food and nutritional support... (while) growing violence and bureaucratic procedures impede access to conflict affected areas.”
Child malnutrition in Sudan is “at emergency levels,” the statement said.
In Central Darfur, acute malnutrition is estimated to be at 15.6 percent among children under five, while at the Zamzam camp for displaced people in North Darfur state it is close to 30 percent.
“We need immediate and safe access to deliver the humanitarian assistance that they so desperately need,” said WFP head Cindy McCain.
“Millions of lives are at stake and the international community must act now or we risk losing an entire generation of children,” she said.
The agencies warned: “The window to avert the worst is rapidly closing.”