UPDATES WITH COMMENTS FROM CENTRAL BANK AND MINISTERS
By Muhammed Ali Gurtas
ANKARA (AA) - The Turkish Central Bank on Wednesday announced an increase of late liquidity window interest rates by three percentage points.
According to the statement issued by the bank, the late liquidity window interest rates -- between 4 p.m. and 5 p.m. (between 1300 and 1400GMT) -- were changed.
The borrowing rate was kept at 0 percent while the lending rate was increased from 13.50 to 16.50 percent.
"Current elevated levels of inflation and inflation expectations continue to pose risks on the pricing behavior," the bank said in the statement.
"Accordingly, the committee decided to implement a strong monetary tightening to support price stability," it said. "The Central Bank will continue to use all available instruments in pursuit of the price stability objective."
The bank's move came after the U.S. dollar/Turkish lira exchange rate hit a historic high on Wednesday, climbing to around 4.93. Following the bank's decision, the dollar/lira rate fell steeply to below 4.60.
In the beginning of the year, the USD/TRY rate was 3.78 while the average rate was 3.65 last year.
The bank's Monetary Policy Committee meeting on Wednesday was held urgently. According to the bank's schedule, the next meeting is to be held on June 7.
The Central Bank kept its policy rate -- the one-week repo rate -- constant at 8 percent while the marginal funding and overnight borrowing rates were kept constant at 9.25 and 7.25 percent, respectively.
"Tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement," the bank added.
Following the bank's decision on interest rates, Turkish Deputy Prime Minister Mehmet Simsek -- responsible for the economy -- said on social media it was high time to restore monetary policy credibility and regain investor confidence.
"The government is committed to maintaining fiscal discipline and accelerating structural reforms (including macro prudential measures) to reduce the current account deficit and help the Central Bank's disinflation efforts," he said.
Simsek added that the Central Bank governor and members of the monetary policy committee have his full backing in doing what is necessary to stem the slide of the lira and achieve price stability.
"None of Turkey’s macroeconomic problems are insurmountable," he said. "We have fixed problems in the past, we can do it again."
Earlier on Wednesday, the country's economy minister Nihat Zeybekci also said Turkey had authorized institutions to take necessary steps for maintaining the value of lira against foreign currencies.
"It's impossible to say that the recent fluctuations in the foreign exchange rates are correlated to Turkey's macroeconomic figures," he said. "Thus, we say that this [upward movement in forex rates] is speculative."