Erdogan has consistently refused to raise interest rates to curb rising double-digit inflation, and the value of the lira has plummeted in recent years largely as a result. Inflation in Turkey is now approaching 20%. At the same time, Erdogan intervened at the Central Bank by firing three central bank heads for not aligning with his idea of not raising rates in the face of strong criticism from the opposition and the international community for the effect it may have on emerging currencies.
The downward spiral in the lira does not stop: it plummeted from about 8.5 per dollar in late August to more than 13 per dollar in just three months. On November 24, the currency starred in its biggest drop in a day, of 14%, also due to the words of the Turkish president.
The lira was affected again this Wednesday after it was learned that the Executive Director of Markets of the Central Bank of Turkey has left his post. “The dollar again surpassed 13 against the lira after the reports and remains above that figure despite having reduced some of those gains, which also came after the country reported growth of 7, 4% in the third quarter, a little below expectations, “says Craig Erlam, analyst at Oanda.
“The currency remains very vulnerable to further losses, as President Erdogan continues to fiercely oppose the rate hike and the central bank shows no signs of changing its approach, rather its staff,” the expert adds.
The opposition and the strong request to Erdogan
The largest opposition party in Turkey, the social democratic CHP, has urged the country’s president, the Islamist Recep Tayyip Erdogan, on Wednesday to “stop talking” to prevent the Turkish lira from continuing to fall, as happened last night after a repeated speech. of the head of state.
“The US dollar reacted strongly against Erdogan’s speech last night,” breaking another all-time record against the lira, Kemal Kiliçdaroglu, leader of the Republican People’s Party (CHP), said in a televised interview.
“Stop talking” for a while, the politician said, addressing the president, whom he described as “ignorant of the economy.” The lira fell 7% yesterday against the euro and the US dollar, breaking new records of 15.5 lira / euro and 13.7 lira / dollar, respectively.
The new all-time lows for the Turkish currency were recorded shortly after Erdogan once again defended, in statements broadcast live by state broadcaster TRT, his controversial thesis that interest rates must be lowered to curb inflation. At the start of issuance, the currency suffered an accelerated crash of 3% in less than an hour.
“Interest rates are the reason and inflation is the result,” said the president after stating that the Turkish economy grew 7.4% in the third quarter of the year and is “strong.”
Indirectly he admitted that he influences the decisions of the Central Bank, promising that he will never change his policy of low interest rates, from which, he said, the Turkish people would benefit over time.
On Wednesday morning, the Turkish lira recovered some of the lost ground by opening the euro at 15.24 liras, and at 13.40 the dollar. So far this year the Turkish currency has accumulated a loss of close to 45%, with an accelerated downward trend in the last four weeks, since only in November it depreciated almost 30%.
Source From: Ambito
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