Turkey

Turkey's central bank will try to make its actions more predictable next year while sticking to a monetary policy that gives it "wide freedom of action," Governor Erdem Basci said, Bloomberg News reported yesterday. The governor surprised markets this year with a rate cut in August, followed by the introduction of an "interest rate corridor" in October within which policymakers can set interest rates on a daily basis. They immediately used the corridor to tighten policy. Inflation may end this year at more than 10 percent, compared to a target of 5.5 percent, he said.

Turkey's central bank kept its benchmark interest rate unchanged for a fifth month and said it will keep bank borrowing costs high to restrain inflation and slow credit growth, Blomberg News reported today. The central bank held the one-week repo rate at 5.75 percent today, according to a statement on the website of the Ankara-based institution. The lira weakened 0.1 percent against the dollar after the bank sold $50 million for liras, less than the $150 million maximum it had set. Yields on two-year lira bonds rose 4 basis points, or 0.04 percentage point, to 10.43 percent.

The boom that turned Turkey into Europe’s fastest-growing economy may be imperiled by the debt crisis in neighboring Greece, the continent’s worst performer, Bloomberg reported. Prime Minister Recep Tayyip Erdogan hailed Turkey’s 11 percent first-quarter expansion as “magnificent” on June 30. It hasn’t prevented the lira from sliding to a two-year low, as the country’s trade deficit widens on surging demand for imports. Turkey needs increasing flows of cash to finance the gap -- just as investors take alarm at the risk of default in Greece, where output shrank 5.5 percent.