Turkish Lira Falls as Runaway Inflation Stokes Policy Concerns

  • Economics
Turkish Lira Falls as Runaway Inflation Stokes Policy Concerns

The Turkish lira fell amid concerns policy makers are not acting quickly enough to put a lid on runaway inflation.

The currency slipped as much as 2.6 percent as data showed consumer prices rose 17.9 percent in August from a year earlier. That’s the most since 2003 and more than three times the central bank’s official target of 5 percent. The median forecast in a Bloomberg survey was for an increase to 17.6 percent.

While the central bank has raised interest rates by 700 basis points this year, that hasn’t been enough to shield the lira from a rout that seen it shed more than 40 percent of its value against the dollar.

The latest bout of weakness -- fueled by an escalating spat with the U.S. and a resurgent greenback -- is pushing up import costs and piling pressure on companies that have borrowed heavily in foreign currency.

The central bank next meets to set rates on Sept. 13 and started to drive up the cost of funding by tightening liquidity last month even as it unexpectedly kept its benchmark rate unchanged at its previous policy meeting in July.

Source: Bloomberg