Turkish lira soars after central bank defies Erdogan and raises interest rates
The Turkish lira has soared after the country's central bank defied President Recep Tayyip Erdogan and increased interest rates.
The currency, which had dropped to 6.54 per dollar earlier today, rose to 6.06 per dollar after the bank's monetary policy committee decided to increase interest rates from 17.75 per cent to 24 per cent.
It has since dropped back slightly, sitting at 6.19 per dollar.
President Erdogan had called for interest rates to be lowered just hours before the crunch decision in a bid to sway the bank.
Last week the bank vowed to take action after inflation rose to 18 per cent and speculation grew that it would raise interest rates.
Kathleen Brooks, an analyst at Capital Index, said it was a "powerful signal" the central bank remained independent.
She said: "The central bank has decided that higher rates are justified, even with a slowing economy and potential for a recession, and that halting the currency ‘s slide is of primary importance to the Turkish economy at this juncture.
"Due to the high level of foreign-denominated debt in Turkey, this is a sensible plan.
However, we need to see investors reactions over the next few days and weeks to see if this is enough to stop the capital slide out of Turkey and if the lira can sustain a recovery over the long term."
Paul Greer, from Fidelity International, said: "Today’s rate hike will help Turkey regain some credibility in the eyes of investors, but it remains to be seen if debt market access re-opens for the country."
Erdogan appointed himself chairman of the country's multi-billion-dollar sovereign wealth fund yesterday extending the executive powers of his presidency.
He also named finance minister Berat Albayrak , his son-in-law, as his deputy.