Turkey rules property sales, rental agreements must be in lira

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The monetary policy committee said deterioration in pricing behaviour continued to pose upside risks on the inflation outlook, despite weaker domestic demand conditions.

Mr Erdogan, who has called himself an "enemy of interest rates", chose his son-in-law, Berat Albayrak, as finance minister in July. Later the currency rate stabilized around 6.20 with lira's gains at some 2.2 percent.

The magnitude of the hike was all the more surprising given that just before the decision President Recep Tayyip Erdogan had slammed interest rates as a "tool of exploitation".

On Thursday he ruled that property sales and rental agreements must be made in lira, putting an end to such deals in foreign currencies.

Turkey's central bank's monetary policy committee said on Thursday that its one-week repo rate had been lifted to 24 percent from 17.75 percent, the first rate hike since June.

On Thursday, the Turkish Central Bank exercised that independence - and appeared to reassure investors in the process.

Following the CBRT's announcement, the Turkish lira strengthened to 6.0151 against the USA dollar from a 6.45 level, gaining almost 5 percent.

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It vowed the tight stance in monetary policy would be "maintained decisively until inflation outlook displays a significant improvement". Late last month, South America's second-largest economy saw that rate jump to a staggering 60 percent in a bid to ease investor fears.

"Turkey needs structural reforms to increase productivity, to decrease its dependence on short-term portfolio flows and to decrease the rigidness in the labour market".

"It nearly seems like it's a game of "good cop, bad cop" being played out between the Turkish authorities - with President Erdogan on the one hand still making statements regarding his dislike of interest rates and. a very sizeable reaction from the central bank in response to the recent inflationary and geopolitical developments".

He earlier charged the bank with failing to control inflation and again aired his unorthodox view that low rates bring inflation down.

Anthony Skinner, director of Middle East and North Africa at Verisk Maplecroft, told AFP he believed the hike had already been agreed.

Its monetary committee made a decision to "implement strong monetary tightening to support price stability", it said on Thursday, as it raised interest rates by 625 basis points in the face of a spike in inflation and a slump in the lira. They increased the cost of cash to commercial lenders by around 150 basis points last month by forcing them to use a borrowing tool costlier than the one-week repo rate.

A growing crisis became acute earlier this year following the detention of an American pastor on espionage and terror-related charges, which prompted Donal Trump to double the import tariffs on Turkish steel and aluminium.

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