Tourists change foreign currency to Turkish lira at a currency exchange office in central Istanbul January 2, 2014. (REUTERS/Murad Sezer)
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ISTANBUL: Arresting the lira's freefall would require Turkey's central bank to do something that Prime Minister Recep Tayyip Erdogan says would amount to surrendering to those trying to overthrow him: raise interest rates.The central bank will keep its three main rates unchanged at next week's meeting, according to surveys of economists by Bloomberg. At the central bank's policy meeting last month, Governor Erdem Basci maintained the one-week repurchase rate at 4.5 percent and held the upper and lower bands of his rates corridor at 7.75 percent and 3.5 percent, respectively. Basci vowed in August to keep interest rates unchanged through the end of last year to support the economy.The currency's depreciation may accelerate if the central bank doesn't raise rates next week, Fatih Keresteci, a strategist at HSBC Holdings Plc, said in an emailed report Thursday. The lira will probably weaken to 2.5 per dollar in 12 months even if the central bank does raise rates, which is "ultimately inevitable," according to a report by Goldman Sachs Group Inc. on Jan. 4 .It touched a record low of 4.79 percent on May 17, five days before the Federal Reserve signaled it could scale back stimulus.
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