Reuters blog archive
A big moment for Turkey. After desperate attempts to shore up the lira by burning through its reserves, the central bank must decide whether to raise interest rates instead.
Prime Minister Tayyip Erdogan, fearing an economic slowdown ahead of elections next year, will not want to see a sharp tightening of policy. Instead, he is blaming shadowy forces for his country’s plight.
But a rate rise might be what is required to prevent a full run on the currency and if that is the case, the earlier it is done the better to calm investor nerves. The central bank sent a strong signal last week that it was minded to push up at least some of its key rates regardless of the political pressure.
The odds are on it raising the overnight lending rate by something between 50 and 150 basis points even though testimony by Federal Reserve chairman Ben Bernanke last week has calmed markets about the speed and scale of U.S. withdrawal of stimulus and allowed emerging markets, including Turkey’s, to settle down somewhat.
In language likely to alarm international investors further, Erdogan and members of his government have accused speculators and a "high-interest-rate lobby" of stoking volatility in financial markets to make a quick profit at the expense of the Turkish economy. Now, he has urged Turks not to use credit cards, accusing banks of locking people into poverty with excessive fees.
How much time does massive central bank currency intervention buy? About a day at a time in Turkey’s case. It spent $1.3 billion of its reserves yesterday to stop the lira going into freefall having thrown a record $2.25 billion at the market on Monday.
So far this year, the central bank has burned over $6 billion of its reserves which have now dropped below $40 billion. So that can’t go on for long, meaning an interest rate rise which a slowing economy really doesn’t need must be on the cards. The lira hit a record low versus the dollar on Monday.
from Global Investing:
Turkey's elevation to investment grade last week may or may not be a game changer for its stock and bond markets, but the country is really hoping for a boost to FDI - bricks-and-mortar foreign direct investment into manufacturing or power generation. Its peace process with Kurdish separatists should help.
Speaking last week at Mitsubishi-UFJ's annual Turkey conference, Finance Minister Mehmet Simsek cited data showing an average 2 percentage-point pick-up in FDI in the two years immediately after a country moves into investment grade.
The last time Turks voted in a general election in 2007, opponents feared the socially conservative ruling party was turning Turkey into an Iran-style Islamic state. With voters on Sunday expected to keep Prime Minister Tayyip Erdogan's AK Party in office for a third straight term, critics and some analysts now worry about that less but fear that the future course of democracy may be at stake.
Turkish Prime Minister Tayyip Erdogan accused France of violating the freedom of religion on Wednesday after Paris began enforcing a law barring Muslim women from wearing full face veils in public. He told the Parliamentary Assembly of the Council of Europe that Turkey was the only Muslim country that had copied the French law on secularism, or separating church and state.
Turks, including the country's political leaders, paid their respects on Tuesday to former Prime Minister Necmettin Erbakan, the founder of the country's modern Islamist movement, who died on Sunday. Sombre music poured from loudspeakers outside Istanbul's 15th Century Fatih Mosque and street vendors sold scarves emblazoned with the message "Mujahid Erbakan", celebrating the Erbakan as a holy warrior, as mourners chanted "Allahu Akbar", or "God is Great".
Turkish immigrants in Germany should integrate into society but not assimilate to the point where they abandon their native culture, Prime Minister Tayyip Erdogan said on a visit to Germany on Sunday. Speaking to some 10,000 members of Germany's large Turkish community in the wake of last year's heated debate over the place of foreigners in the country, Erdogan took up the theme of integration amid what he sees as persistent European xenophobia.
A steamy television period drama about a 16th century sultan has angered conservative Muslims in Turkey and sparked a debate over the portrayal of the past in a country rediscovering its Ottoman heritage.
Part of the problem trying to figure out what Egypt's Muslim Brotherhood or Tunisia's Ennahda party would do if they got into any future power structure in their countries is knowing what kind of Islamists they are. The label "Islamist" pops up frequently these days, in comments and warnings and (yes) news reports, but the term is so broad that it even covers groups that oppose each other. Just as the Muslim world is not a bloc, the Islamist world is not a bloc.
Guests at the Istanbul premiere of a new vampire film were among the first victims of new curbs on alcohol that have raised secularist fears Islamic strictures may be encroaching on everyday life.
The rules, announced earlier this month by the tobacco and alcohol watchdog, tighten up licence requirements for serving alcohol, impose restrictions on alcohol marketing and limits sales to designated areas in stores.