Turkish lira little changed as central bank meeting approaches

ISTANBUL: The Turkish lira was little changed on Tuesday as investors waited for a central bank meeting this week where the policymakers are expected to raise interest rates.

The lira has lost more than 40 percent of its value this year on concern over President Tayyip Erdogan's grip on monetary policy and, more recently, over a diplomatic row between Ankara and Washington.

Erdogan, a self-described "enemy" of interest rates, wants lower borrowing costs to keep credit-fueled growth on track.

Investors - who fear the economy is set for a hard landing - say a rates need to rise, but the bank might not be able to meet market expectations partly because of Erdogan's antipathy to higher borrowing costs.

The lira stood at 6.45 to the dollar at 0825 GMT on Tuesday, after closing on Monday at 6.4636.

At its last monetary policy committee meeting in July, the central bank left its one-week repo rate unchanged at 17.75 percent, confounding expectations. The lira has since lost some 26 percent of its value and official data showed last week that annual inflation surged to 17.90 percent in August.

In a statement released shortly after inflation data, the central bank promised to take the necessary action to support price stability, raising market expectations for a rate hike in Thursday's meeting.

"With the assumption of USD/TRY remaining stable at around the 6.40s, we expect CPI to peak at 20.7%Y in December," Morgan Stanley economist Ercan Erguzel said in a note.

"Combined with ongoing financial stability concerns, this makes it necessary for the CBT to adjust its monetary policy stance."