The lira has fallen more than 7 percent this month.
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Turkey's central bank signaled Tuesday it would stick with its unorthodox steps to manage the fall in the lira, saying its moves to drive up funding costs were working and would continue until the inflation outlook improves. The lira has fallen more than 7 percent this month after double-digit declines in both 2015 and 2016, making it one of the world's worst-performing currencies, while the economy shrank in the third quarter for the first time in seven years.The central bank raised its main policy rate – the one-week repo rate – on Nov. 25 for the first time since 2014 but it has remained unchanged since and President Recep Tayyip Erdogan has made it clear he wants borrowing costs to stay low to boost growth. Instead, the bank has stopped holding one-week repos, closing off its main channel for funding the market, and raised overnight and last resort borrowing rates, pushing funding costs for banks higher without having to change the benchmark rate.With the lira continuing to weaken, the bank raised its inflation forecast for the end of 2017 to 8.0 percent from 6.5 percent in its previous report.
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