January 20, 2020 / 12:00 PM / a month ago

UPDATE 1-Turkish finmin says exchange rate should be 'competitive' -media

(Adds details, background)

ISTANBUL, Jan 20 (Reuters) - Turkey’s finance minister said on Monday the lira’s exchange rate should be “competitive” and he appeared to downplay risks that aggressive monetary easing brought about negative real interest rates, according to Turkish media.

Turkey’s lira lost some 36% of its value in the last two years, mostly during a currency crisis sparked in 2018 by concerns over the independence of the central bank, as well as deteriorating ties with Washington.

In a news conference with local media, Finance Minister Berat Albayrak said the exchange rate had stabilised but that it should be competitive, according to broadcaster NTV. While Albayrak did not appear to elaborate, some economies prefer weaker currencies to boost exports.

Separately, broadcaster Bloomberg HT quoted Albayrak as saying that Turkey had previously encountered negative real rates but that what matter are nominal rates.

Turkey’s central bank has said it determines monetary policy to yield a “reasonable” real rate.

According to some calculations, that measure entered negative territory after the bank cut its policy rate to 11.25% last week, below the latest annual inflation measure.

Ratings agency Moody’s said earlier on Monday that negative rates will likely harm the central bank’s credibility and risk hitting investor confidence.

NTV also quoted Albayrak as saying inflation would come down to single digits in 2020 and that he does not expect the increase in loan volumes to pressure inflation.

Reporting by Ezgi Erkoyun and Ali Kucukgocmen; Editing by Jonathan Spicer

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