Concerns seep into investors after inflation in Turkey scores doz

Turkey's current account deficit, coupled with a double-digit inflation rate, is a major concern for investors. Concerns about the economic outlook have pushed the country's lira currency to record lows in recent days. According to Reuters, data showed that inflation in Turkey rose to about 11 percent last month, while the current account deficit reached 4.152 billion dollars in February.
The Turkish inflation rate is double the central bank's target of inflation to 5 percent, which explained that high inflation levels at the moment as well as expectations remain a threat to prices. The lira fell 1.5 percent to a record low against the dollar on Friday, weighed down by a decision by Standard & Poor's on Tuesday to lower Turkey's sovereign debt rating to lower in the high-risk debt category. The credit agency warned of the exhaustion of the Turkish economy, and said in a statement that "there is a risk of a sharp decline in the economy of Turkey's overheated debt-dependent." The IMF warned recently that "the economy shows clear signs of hyperactivity" and warned that "fiscal policy seems too loose and has low credibility."
The Turkish lira has seen a significant decline in its value against foreign currencies since the failed coup attempt in Turkey in mid-July 2016. The recent decline in the exchange rate of the lira after the Turkish Statistical Agency released data on consumer price growth in April, Where the index rose 10.85%, which was expected 10.5%, due to the significant increase in the prices of clothing and transport services.
In any country, the central bank tends to raise interest rates when the inflation rate rises in the economy (increasing prices of goods and services), and thus makes the price of borrowing money very expensive. People and business borrowings fall, spending and demand drop, and inflation slows.
The central "Turkish" had lifted last week interest rates, which helped to support the Turkish currency lira, which is one of the worst performing emerging market currencies.
But analysts are still wondering whether this move is too small and whether there is any intention of further lifting in Ankara, as Turkish President Recep Tayyip Erdogan is strongly opposed to raising lending rates. Turkish central bank governor Murad Gitinkaya said the bank would tighten monetary policy further if needed, adding that the bank would closely monitor inflation expectations and pricing behavior. For his part, Erdogan pledged to thousands of supporters in Istanbul to cut interest rates, inflation and the current account deficit after the presidential and parliamentary elections scheduled for June 24.
Erdogan, who describes himself as an "interest rate foe", once again called for a reduction in borrowing costs to stimulate loan growth and boost the economy. The central bank's reluctance to tighten monetary policy has fueled fears it is under political pressure.
Last month, the central bank raised its benchmark interest rate more than expected by 75 basis points, but analysts said it would need to do more to fight inflation and support the currency.
"I pledge that inflation, interest rates and current account deficits will fall, and the Turkish economy will be better able to withstand external shocks and financial attacks, and will increase Turkey's attractiveness to investment," Erdogan said.

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