Turkish Central Bank has raised the Late Liquidity Window again by 400 point since January 2017. The unwillingness of the Cental Bank to raise the interest rate causes the Bank to lose it credibility and weakening the Lira. The rate rise was required to attempt to stem the losses in the Lira and put a lid on rising inflation.
The investors in Europe state that unless Central Bank demonstrates to act independentl, the weakening of Lira will continue.
Overall, this is a disappointing move, as the central bank did the bear minimum to try and halt the decline in the lira.
When the independence of a central bank is threatened, as is the case in Turkey, the market’s trust is lost, which can weigh on a currency, as we are seeing today.
Lira has been weakening more than 12% since January 2017. By far it is the most weakening cureency amongst the Emerging Market.
