Turkey’s central bank announced effective in October it is raising the maximum interest rate credit card lenders can charge.
According to a report in Reuters citing Turkey’s central bank, the rate is going to 2.5 percent for Turkish lira and 1.80 percent for foreign exchange transactions. For overdue payments, the interest rate will rise to a maximum of 2.75 percent for Turkish lira charges and 2.30 percent for foreign currency ones. The changes, noted Reuters, are in effect on October 1st. It is an 18 basis point increase on the foreign exchange limits, noted Reuters. Late last week Turkish President Recep Tayyip Erdogan said the government would place any new investments on hold as it deals with double-digit inflation and the plummeting lira. The country’s finance minister Berat Albayrak is expected to offer a medium-term economic plan this week, reported CNBC.
So far, moves to raise interest rates are not sitting well with some investors. Mark Mobius, founder of Mobius Capital Partners, told CNBC that the central bank’s interest rate raising has limits. “I agree with Erdogan in some ways because the central banking raising rates is not the solution,” Mobius said on CNBC’s “Street Signs Europe” late last week. The investor argued that Turkey needs to gain the confidence of investors both domestically and internationally. “That means you’ve got to start policies of balancing the budgets and doing things that give confidence to investors,” Mobius told CNBC. Mobius pointed to Argentina, which surprised the markets in August when it asked for the early release of funds from a $50 billion financing deal with the International Monetary Fund. That sent the peso plummeting. “Raising interest rates… is not going to do the trick, and we’ve seen that around the world by the way,” he said. “Argentina’s a good example where you can raise rates but if people are not confident in what the government is doing, then you’re not going to have an effect.”