Erdogan: Turkey came under 'economic attack' after US statements

AFP  File | The lira could come under renewed pressure if Turkey's central bank fails to increase interest rates as much as markets expect

"The central bank will continue to use all available instruments in pursuit of the price stability objective", the central bank's monetary policy committee said in a statement.

Turkish President Recep Tayyip Erdogan has accused the United States of launching what he called a "heinous economic attack" on Turkey after the national currency lira hit a record low following USA sanctions.

But hours later, the Turkish Central Bank ignored Erdogan, raising interest rates to fight price increases and the risk of runaway inflation.

Before the move by policy makers in Ankara Thursday, the run on the currency forced the central bank to deliver some tightening where it could.

It described the hike as a "strong monetary tightening to support price stability".

"We can not allow the use of the tool of exploitation that is interest rates", Erdogan told a meeting in Istanbul on Thursday.

Thursday's decree and Erdogan's remarks come after the lira's drastic fall in value against the U.S. dollar last month, during one of the worst diplomatic rows between North Atlantic Treaty Organisation allies Washington and Ankara.

There had been indications from the bank that it would raise rates after inflation came in at almost 18 per cent in August, according to official data last week. Erdoğan has always been pressuring the bank to keep interest rates low to encourage economic growth.

Facing a deep slide in the lira and a steep run higher in inflation, the central bank felt compelled to lift rates to restore investor confidence-a risky gambit that boosted the lira but could further damage the economy.

Ignoring calls for restraint from President Recep Tayyip Erdoğan, the bank raised its main short-term rate from 17.5% following weeks of pressure from worldwide investors.

It said the policy would be "maintained decisively until inflation outlook displays a significant improvement".

The embattled currency has fallen by 40% this year amid a lack of interest rate hikes to control inflation.

Analysts say the lira´s plunge last month had been sparked by a combination of concerns over domestic policymaking and a crisis in relations with the United States.

Addressing a meeting of Turkish tradespeople in Ankara on Thursday, before the rate decision was announced, Erdoğan said the central bank is independent and takes its own decisions.

The US hit two Turkish ministers with sanctions over the detention of US pastor Andrew Brunson and President Donald Trump doubled steel and aluminium tariffs on Turkey.

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