Homepage / Currency / Turkey's leadership scrambles to regain investor confidence in its monetary policy
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election

Currency, United States Finance

Turkey's leadership scrambles to regain investor confidence in its monetary policy

Turkey may have made a long overdue move to raise interest rates in an attempt to rescue its plummeting national currency, but investors are still in doubt over the independence of its central bank ahead of national elections in June.

On Friday, aiming to allay market fears over its monetary policy and rising inflation, Turkish Deputy Prime Minister Mehmet Simsek announced that the country would not step back from a rules-based economy and that its central bank would “deliver additional reaction if needed,” hinting at further rate hikes.

The central bank on Wednesday convened an extraordinary meeting to hike rates by 300 basis points to 16.5 percent, amid a currency rout and double-digit inflation. Analysts have called it the “bare minimum,” however — and the biggest casualty of this damaged credibility may continue to be the Turkish lira.

Turkey’s currency was in free-fall as the central bank, under pressure from President Recep Erdogan — who has called interest rates “the mother of all evil” — wouldn’t lift rates to curb the country’s ballooning inflation, which in April stood at 10.85 percent. UBS in a note Friday described the hike as having been delivered belatedly, “but should help in stabilizing the lira in the short term.”

“Looks like Erdogan got the message — Simsek been told to go out and do whatever it takes to stabilize the market,” said Timothy Ash, senior emerging markets sovereign strategist at Bluebay Asset Management. But asked if this changed his mind on the central bank’s independence, he said, “Not really.”

He described the last rate hike as being “for some, too little, too late,” adding that “they never seem to learn… until it is too late.”

Before the rate rise, the lira was at a record low of 4.929 to the dollar, down 20 percent against the greenback since the start of this year, according to Reuters. The bank’s move pulled the lira back up by 2 percent on the day to 4.565, but it’s slipped back down to 4.741 as of 12:38 a.m. Friday, Istanbul time (5:38 a.m. ET).

The central bank has been under pressure to keep rates down in favor of fueling its growth rate, which led the G20 at more than 7 percent in 2017. The president’s interventionist tendencies have damaged the government’s credibility when it comes to monetary policy and given investors little reason to believe in the independence of its central bank, even after Wednesday’s rate hike.

“It’s really an urgent problem about the central bank credibility and… the president steps in and casts further doubt on that,” said James McCormack, global head of sovereigns rating at Fitch ratings. “We’ve had issues with the central bank and their policy credibility over the past couple of years.”

Turkey also suffers from a widening current account deficit (CAD), which by March had hit $4.8 billion, a $1.7 billion increase on the previous year.

Erdogan said this week that Turkey would bring in “new and serious” measures to battle inflation and lower the CAD after the upcoming June election, which he mandated as an early vote instead of the original election date scheduled for November 2019.

The move was widely seen as a power grab and an attempt to secure reelection before the economy got any worse. If victorious, Erdogan will be able to eliminate the role of prime minister and heavily consolidate executive power.

Observers, meanwhile, aren’t entirely convinced by Erdogan’s economic pledges.

“Some of the things the president has said, it’s not quite clear how those are going to be delivered,” McCormack said. “He’s talked about lowering inflation, but doesn’t want to hike interest rates; talked about bringing the current account deficit in, but also talking about fiscal expansion. Those two things go in opposite directions.”

Turkey’s high inflation has been a longstanding problem that’s focused markets on its external financing needs, which McCormack says are around $200 billion a year — more than twice what its foreign reserves are.

It’s thanks to Turkey’s international financing needs that the lira’s battering stands out among emerging market currencies, many of which are being squeezed on the back of a strengthening dollar and rising U.S. Treasury yields.

In the meantime, more action will be required from Turkey’s policy leaders in order to convince markets that the central bank’s rate turnaround wasn’t just political show.

“Electoral necessity won the day, and I don’t think Erdogan’s underlying views on interest rates changed,” Ash said of Wednesday’s move. “It still leaves a bad taste over how economic policy will be made under the new executive presidency and Erdogan with a lack of real checks and balances.”

Source: cnbc
Turkey's leadership scrambles to regain investor confidence in its monetary policy

Comments are closed.