Fed’s Powell met with Turkey’s central bank chief in May as lira fell

July 2, 2020

SAN FRANCISCO (Reuters) – U.S. Federal Reserve Chair Jerome Powell spoke in May with Turkey’s central bank chief, records released by the U.S. central bank on Thursday showed, as fallout from the coronavirus pandemic was putting enormous pressure on the Middle Eastern country’s economy, and its currency.

Powell’s calendar is silent on the contents of the half-hour May 1 phone call with his Turkish counterpart, Murat Uysay. But it took place as the Turkish lira was falling rapidly, ultimately hitting an all-time low on May 7.

That month Ankara was urgently seeking access to funds from other central banks to head off a potential currency spiral, with analysts saying tens of billions of dollars might be needed.

The Turkish central bank had been buying record amounts of government bonds in an effort to backstop the country’s financial response to the pandemic, putting downward pressure on Turkey’s lira.

The Fed has swap lines with more than a dozen other central banks to help them with currency pressures, but not with Turkey.

Ultimately Ankara secured some aid from Qatar, tripling an existing currency-swap agreement to $15 billion in late May. The deal provided much-needed foreign funding to reinforce Turkey’s depleted reserves and help steady the currency.

Still, analysts have raised concerns over Turkey’s depleted currency reserves and only partial success in gaining access to foreign funding.

(Reporting by Ann Saphir and Lindsay Dunsmuir, with reporting by Jonathan Spicer, Editing by Chizu Nomiyama)