Turkish central bank chief meets with bank CEOs after lira plunge

Turkish central bank governor Şahap Kavcıoğlu will meet with the chief executives of the country’s banks on Thursday to discuss monetary policy and extreme volatility in the Turkish lira, local media including the Dünya newspaper reported.

Ali Akben, the head of the banking regulator, and Alpaslan Çakar, the head of the Banks’ Association of Turkey (TBB), will also attend the talks, which will be held in the afternoon, Dünya said.

Turkey’s lira has slumped to successive record lows against the dollar and euro since the central bank extended a series of rate cuts last week and President Recep Tayyip Erdoğan said the decreasing borrowing costs were part of a new economic model to boost exports, jobs and economic growth. The central bank’s benchmark interest rate now stands at 15 percent compared with consumer price inflation of 19.9 percent.

The lira was trading down 0.6 percent at 12.15 per dollar as of 10:11 a.m. local time on Thursday. It crashed by more than 15 percent to an all-time low of 13.52 per dollar on Tuesday in a 12-straight day of declines, the longest losing streak in two decades.

The meeting between the bankers follows talks between Erdoğan and Kavcıoğlu on Tuesday. Turkey’s state-run banks have acted on Erdoğan’s orders to reduce interest rates on loans in tandem with the central bank’s rate cuts. His government has called on private lenders to do the same.

On Wednesday, state-run banks sold foreign currency in the market to help bolster the lira, Bloomberg reported citing people familiar with the matter. The lira gained almost 5 percent on the day.

The losses for the lira are pushing up prices for businesses and consumers. Some economists are predicting that inflation could accelerate to more than 25 percent in the coming months unless the lira reverses its losses.

The cost of petrol will increase to more than 10 liras per litre for the first time overnight on Thursday, Dünya reported, citing calculations based on an automatic pricing mechanism.  

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