Turkish lira hits new high amid rate hike talk

Erdogan appoints himself chairman of Turkey's sovereign wealth fund

The embattled currency has fallen by 40% this year amid a lack of interest rate hikes to control inflation.

Its monetary committee made a decision to "implement strong monetary tightening to support price stability", it said on Thursday, as it raised interest rates by 625 basis points in the face of a spike in inflation and a slump in the lira. The rate hike could squeeze growth further, but independent experts say it is needed to contain inflation of about 18% and support the currency.

The hefty 6.25 percentage point rise is the bank's latest attempt to stem the currency's collapse.

"Erdogan's comments clearly show that he does not support this and it becomes much more hard, if not impossible, for the Turkish central bank to tighten enough to stabilize the lira and get inflation under control", Esther Reichelt, a forex strategist at Commerzbank in Frankfurt, told DW.

Mr Erdogan, who has called himself an "enemy of interest rates", chose his son-in-law, Berat Albayrak, as finance minister in July. But there are also private banks, they are acting according to what?

A growing crisis became acute earlier this year following the detention of an American pastor on espionage and terror-related charges, which prompted Donal Trump to double the import tariffs on Turkish steel and aluminium. Subsequently, the lira lost some 25 percent of its value while Turkish authorities have taken a series of steps created to support the currency, with the central bank taking liquidity measures and the banking watchdog limiting derivative transactions.

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However, speaking to Middle East Eye, Julian Walker, a director at Spot Blue, a UK-based company that specialises in property in Turkey, said: "I don't think this move will be bad for business".

"With the current volatility, you have some settlement concerns, the days between when the deal was agreed and the final few days for it to go through. It's only really going to be a bit problematic if you're repatriating to the country you came from".

It remains to be seen how the news will sit with Erdogan, however.

Zafer Sonmez, head of the Turkey regional office of the Malaysian sovereign wealth fund Khazanah Nasional, was named as general manager.

Last September, Erdogan said the fund had failed to realize a "targeted and desired" outcome. Its portfolio includes 100% ownership of Turkish Petroleum, Borsa Istanbul and Ziraat Bank, as well as shares in national carrier Turkish Airlines (49.12%) and Halk Bank (51.11%).

The fund was established in August 2016, in the aftermath of the attempted overthrow of Erdogan the previous month, to develop and increase the value of Turkey's strategic assets and provide resources for investment.

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