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| - Turkey's central bank on Thursday aggressively raised its main interest rate after a major economic team shake-up that included President Recep Tayyip Erdogan's son-in-law giving up his finance ministry brief. The bank said the one-week repo auction rate would go to 15 percent from 10.25 percent and that it was eliminating all other lending facilities to make its policy decisions more "transparent". The Turkish lira rose two percent in value against the dollar moments after the announcements before paring back some of its gains. The currency has been one of the worst performing among emerging markets and has lost nearly 23 percent against the greenback since the start of the year. Former finance minister Naci Agbal was named governor in a presidential decree published on November 7, just 16 months after his embattled predecessor's appointment. The day after, Erdogan's son-in-law Berat Albayrak quit as finance minister citing health reasons, although reports said he left because of his objection to Agbal's appointment. Jason Tuvey, senior emerging markets economist at Capital Economics, said the interest rate hike "appears to have done enough to convince investors that there really is a positive shift in economic policymaking under way". But he noted that "with the average cost of funding standing at 14.80 percent as of yesterday, today's decision amounts to an effective monetary tightening of 20 basis points." There is scepticism over how long the nominally independent bank will be free to act since Erdogan believes high interest rates cause high inflation. "We should not let our investors be oppressed by high interest rates," he said on Wednesday. Thursday's hike also does little to ease concerns about the bank's depleted foreign currency reserves, which shrank by an estimated $140 billion since the start of 2019 in a failed defence of the lira. Consumer price inflation was 11.89 percent in October and the annual rate has remained in the double-digits since September 2019. The bank said it "decided to implement a transparent and strong monetary tightening in order to eliminate risks to the inflation outlook, contain inflation expectations and restore the disinflation process." Erdogan indicated there would be a rate hike as he sought to appease markets last week with promises to follow free-market rules. He told parliament he was prepared to "make sacrifices and swallow a bitter pill". Ali Babacan, an ex-economy tsar who broke away from Erdogan's ruling AKP last year, told the opposition Sozcu daily that Erdogan did not usually use such language. "It's not his terminology... I don't think he will use that phrase ever again," Babacan said. raz/zak/cdw
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