Turkish central bank to meet amid lira freefall

The central bank has been under pressure from Erdogan's government not to raise interest rates

ANKARA - Turkey's central bank is due to meet on Tuesday with the local currency in freefall, pressured by the political crisis rocking Prime Minister Recep Tayyip Erdogan's government.
The lira was quoted at 2.2379 to the dollar in morning trade compared to a record low of 2.2412 on Monday, and at 3.0349 to the euro from 3.0392.
The government said on Monday that the bank, which is statutorily independent, should not raise rates but some analysts said it might have no choice when it meets from 1200 GMT.
"We think that any rate hike needs to be aggressive enough to push the short term rates to double digit territory," Inan Demir, chief economist at Istanbul-based Finansbank, said in a statement.
"Such a bold move ... could possibly help (the central bank) regain some of its lost credibility."
The central bank has been under pressure from Erdogan's government not to raise interest rates to boost growth and keep inflation in check.
Instead, it has been using its foreign currency reserves to shore up the currency, selling about $17.6 billion last year.
Demir said there was "little sign" so far that the central bank would stop using its reserves and defend the lira through rate increases.
Economy Minister Nihat Zeybekci said on Monday that the central bank should not raise rates "because it would be an inconclusive step and put a permanent burden on our economy".
Turkey's finances, like those of other emerging economies, are also under pressure over the US Federal Reserve move to reduce its monetary stimulus programme.