Turkey central bank stuns markets with giant rate hike

Turkish lira gains value against US dollar

The rate rise comes on the same day as the Bank of England left the interest rate untouched at 0.75%, citing heightened risks to global growth as a result of volatility within emerging markets, as well as tensions between the U.S. and China. "If you say "inflation is the cause, the rate is the result", you do not know this business, friend", he added.

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

It was not immediately clear if Erdogan had been aware of the central bank's decision when he made his comments. "The lira crisis seems to be far from over".

The lira firmed to 6.01 against the dollar following the decision, from more than 6.4176 beforehand.

Turkey's currency and inflationary troubles are also compounded by the threat of steel and aluminium tariffs from the USA as well as sanctions over the detention of an American evangelical pastor.

Economists have warned of a possible recession in Turkey after a slowdown in the second financial quarter of 0.9 percent, compared to 1.5 percent in the first quarter of this year.

Countering a trend popular within Turkey, especially within the retail sector, the government said any contracts previously made in foreign currency but which were now in effect must be converted into lira within 30 days.

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However, speaking to Middle East Eye, Julian Walker, a director at Spot Blue, a UK-based company that specialises in property in Turkey, said: "I don't think this move will be bad for business. It's only really going to be a bit problematic if you're repatriating to the country you came from".

Turkish President Tayyip Erdogan on Friday said Turkey came under a "heinous economic attack" after statements from the United States.

It remains to be seen how the news will sit with Erdogan, however.

Erdogan appointed as the fund's general manager Zafer Sonmez, head of the Turkey regional office of the Malaysian sovereign wealth fund Khazanah Nasional.

With the lofty motto of "for a stronger Turkey", the fund describes its mission as developing and increasing the value of Turkey's strategic assets by "transparency-oriented corporate governance".

Last September, Erdogan said the fund had failed to realize a "targeted and desired" outcome. Its portfolio includes 100% ownership of Turkish Petroleum, Borsa Istanbul and Ziraat Bank, as well as shares in national carrier Turkish Airlines (49.12%) and Halk Bank (51.11%).

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