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Senior Turkish economy officials said on Monday that a possible double digits inflation on Turkey in the first quarter. The inflation spells more pressure in the Central’s Bank plan to up the interest hikes. Lira, on the other hand, continues to weaken since the start of 2017.

Recent reports from economy officials expect lira to loosen up several beating after the referendum. The lira hits 3.7780 gainst the dollar last trading and plummeted to a record low of 3.9417 last Wednesday, lira dropped as much as 10 percent today due to the concern over Turkey’s political and economic outlook and the doubts about whether authorities will take the necessary actions to seize the continued downfall.

According to President Tayyip Erdogan, that a scheduled meeting with economy officials on Monday along with the central bank governor to discuss the developments including the lira. Erdogan is a vocal supporter of higher interest hikes and believes that cheap credit can spur lending and bolster the economy, and plans to lower the borrowing. On an interview last Thursday, Erdogan talked about how he has the ability to make the necessary steps to defend the lira.

The Turkish government and the president are doing their best to cut the losing momentum on the lira; they are looking to pass a referendum in the coming months on constitutional changes that will enable the full presidential system and extends the executive power of the president.

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Central Bank Slashes Interest Rates

While the Central Bank of the Republic of Turkey has skipped its one-week repo auction last Monday in hopes to boost the lira by cutting the amount of local currency circulating in the markets. Local banks were used to prevent the sharp decline in the value of the lira against other currencies after skipping the third trading day in a row.

To further apprehend the collapsing lira, the Central Bank also limited the borrowing limit of local banks in the Interbank Money Market last Friday, by reducing the borrowing limits to a total of 11 billion Turkish Lira’s or a total of $2.9 billion that took effect last Monday.  The Central Bank also sees to set interest rate this coming January 24, the bank is also on a roll of measures to reduce liquidity and effectively drive up borrowing costs without hiking rates outright.

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