Turkey\u2019s central bank needs to raise interest rates to contain the \ncountry\u2019s financial crisis, veteran economist Stephen Roach told CNBC on\n Monday.<\/p>\n\n\n\n
Earlier in the day, Turkish lira dropped to a new all-time low of \n7.24 against the U.S. dollar. It later pared some of those losses to \ntrade around 6.99.<\/p>\n\n\n\n
\u201cThe markets clearly want much more decisive action,\u201d said Roach, former chairman of Morgan Stanley\u2019s operations in Asia.<\/p>\n\n\n\n
However, Turkish President Recep Tayyip Erdogan \u201cis not about to do \nthat both in terms of policy as well as rhetoric,\u201d he said on \u201cPower \nLunch.\u201d<\/p>\n\n\n\n
Roach, now a senior fellow at Yale University, believes what Turkey needs is \u201ca really large and strong monetary tightening.\u201d<\/p>\n\n\n\n
Last week, the economic crisis engulfing Turkey deepened after \nPresident Donald Trump said he was doubling metal tariffs on the \ncountry. His remarks came after Erdogan asked citizens to convert their \ndollars and other foreign currencies and gold to lira.<\/p>\n\n\n\n
After Trump\u2019s comments, the lira briefly plunged 20 percent against \nthe greenback on Friday, finishing the session lower by about 16 \npercent. On Monday, Turkey\u2019s central bank tried to ease fears by saying \nit will provide needed liquidity to the country\u2019s banks.<\/p>\n\n\n\n
Roach said what\u2019s most worrisome is not the cumulative decline in the currency but the speed of the fall.<\/p>\n\n\n\n
\u201cWhen you see an accelerating downfall like this met with largely \nincremental actions by the central bank, then you have to worry about \nwhere this is going with respect to Turkey,\u201d he said.<\/p>\n\n\n\n
Turkey\u2019s inflation rate reached 16 percent last month, well above the\n central bank\u2019s 5 percent target. While central banks generally hike \nrates to control inflation, Erdogan has opted to keep rates low in an \neffort to drive growth.<\/p>\n","protected":false},"excerpt":{"rendered":"