The emerging market crisis has pushed another central bank to extremes this morning. Fresh from the BBC:
The Turkish central bank has raised its overnight lending rate to 12% from 7.75% after an emergency meeting.
It also increased the overnight borrowing rate to 8% from 3.5%.
The move was intended to help stabilise the value of the lira, which plunged in recent days amid ongoing turmoil across emerging markets.
The lira immediately strengthened after the central bank announcement, to 2.2 lira to the US dollar, from 2.253.
The Turkish central bank had been slow to act amid fears that a rate rise could hurt the Turkish economy.
The Turkish government has forecast that growth will pick up from an expected rate of 3.6% in 2013 to 4% for this year.
Those figures are sharply down from the 8% growth Turkey achieved in both 2010 and 2011.
This follows India’s 25bps hike yesterday. While wider markets are taking succor from these moves the next penny to drop will be slowing growth, which will be under serious and perilous revision in affected nations. These are the extreme examples but tightening is taking place across emerging markets, 40% of the global economy. I’ll take a punt and say taper pauses after the March tightening at ongoing Fed purchases of $45 billion per month.
