By Tuba Sahin
ANKARA (AA) - The Turkish Central Bank will reduce to zero liquidity limits offered to primary dealers as part of open market operations, it announced on Tuesday.
The decision will be effective as of this Wednesday, the bank said in a statement.
Enver Erkan, an economist at private investment firm Tera Yatirim, said tightening liquidity conditions will reduce the supply of cheap funding.
"We expect Turkish lira-weighted average interest rates will surpass the bank's policy rate (8.25%) and hit 9.75%," Erkan said, adding that "the move can be seen as a covert rate hike."
Last Friday, the bank decided to cut liquidity limits in half after the dollar/lira exchange rate hit an all-time high of over 7.30.