Turkey

Turkey’s central bank today cut one of its key rates for the fifth consecutive month after an attempted coup triggered fears about repercussions for the country’s economy, the Wall Street Journal reported. The Monetary Policy Committee in Ankara said it cut the overnight lending rate to 8.75 percent from 9 percent. It kept its benchmark one-week repo rate steady at 7.5 percent and its overnight borrowing rate at 7.25 percent. After the decision, Turkey’s lira extended its losses, trading 0.1 percent lower at 2.9847 per dollar, compared with 2.9713 before the announcement.

Turkey needs “a new growth model, a new story. Growth based on hot money flows is over.” Those are the words of Cemil Ertem, chief adviser to Recep Tayyip Erdogan, Turkey’s president, in a television interview on June 9, the Financial Times reported. Mr Ertem is one of many government figures who have castigated Turkey’s central bank for not lowering interest rates quickly enough, and who see foreign portfolio investors and an ill-defined “interest rate lobby” as the enemies of Turkish prosperity.

National Bank of Greece said yesterday that it had agreed to sell a majority stake in Finansbank of Turkey to Qatar National Bank for 2.75 billion euros, or about $3 billion, the New York Times DealBook blog reported yesterday. The Greek bank began exploring “strategic options” for its Turkish business last year after the European Central Bank identified a capital shortfall at National Bank of Greece and at other Greek lenders.

Turkey’s central bank left interest rates unchanged for a 10th consecutive month on Tuesday, sending markets tumbling after it defied expectations that it would raise rates in tandem with the U.S. Federal Reserve, the Wall Street Journal reported today. The Monetary Policy Committee kept the benchmark one-week repo rate at 7.5 percent, and left unchanged its interest-rate corridor, ranging from the overnight borrowing rate of 7.25 percent to the 10.75 percent overnight lending rate.

The pressure on Turkey’s lira isn’t likely to ease any time soon, which could mean more pain for one of the most battered emerging-market currencies, the Wall Street Journal reported today. The lira sank to a record low against the dollar yesterday, pressured by domestic political uncertainty, escalating violence and the prospect of a lowered credit-rating outlook on top of the possibility of a U.S. interest-rate increase later this week. The uncertainty isn’t expected to let up before elections slated for November.

Turkey's banking watchdog placed Asya Katilim Bankasi AS under watch and armed regulators with broad powers over the beleaguered Islamic lender, The Wall Street Journal reported. The move brings the bank one step closer to state seizure, as capital outflows and a ratings downgrade exacerbate damages from a political fight embroiling the lender, which has fallen from the largest of Turkey's four Islamic banks in December to third in terms of assets.

As Turkish interest rates spike and the economy slows, local bankers and real estate experts are becoming increasingly worried that Istanbul’s real estate market may be heading for a fall, the International New York Times reported. And they are reminded of similarities between the situation here and what happened in Spain and Ireland, where alliances among banks, developers and politicians contributed to the creation of real estate bubbles that popped once interest rates began to rise, puncturing the overall economies as well.

Turkey's central bank—beset by political instability, tumbling confidence and one of the world's fastest falling currencies—said that it will convene an emergency meeting Tuesday, a move that could test whether once-golden emerging markets can avert a destabilizing crisis, The Wall Street Journal reported. Central bankers in many emerging-market countries are under intense political pressure to keep interest rates low to keep economic growth on track, despite the inflationary effects.

Turkey’s legal morass thickened after a prosecutor said Prime Minister Recep Tayyip Erdogan’s government is obstructing a graft probe by preventing detentions, disobeying court orders and allowing suspects to flee, Bloomberg News reported today. Istanbul Prosecutor Muammer Akkas said yesterday that the investigation he was leading into businessmen and officials for involvement in bribery, rigging tenders, and fraud was stripped from him. Erdogan has said that the probe is a smear campaign orchestrated by his opponents.

Prime Minister Recep Tayyip Erdogan suffered the worst blow in his decade in power when an old friend quit the cabinet and called for his resignation, the Wall Street Journal reported today. The public chastisement came after the premier pushed Environment and Urban Planning Minister Erdogan Bayraktar, who has served alongside Erdogan since the 1990s, and two other ministers to resign Wednesday. Each has a son who has been implicated in the graft investigation.