Turkey’s lira at record low as central bank cuts rates again1 min read . Updated: 18 Nov 2021, 05:56 PM IST
- President Recep Tayyip Erdogan reiterated calls for lower interest rates this week, causing investors to sell lira assets
Turkey’s currency traded at a record low against the dollar on Thursday as the country’s central bank cut rates again, urged by President Recep Tayyip Erdogan, despite rapid inflation that threatens Turkey’s broader economy and poses a challenge to the longtime leader.
The central bank cut its key rate by 100 basis points, to 15% from 16%, in line with market expectations.
Earlier on Thursday, the lira dropped to 10.97 against the dollar before slightly rebounding ahead of the central bank’s meeting. The currency has lost nearly 8% of its value since Monday as Mr. Erdogan reiterated a demand for lower interest rates as a part of his unorthodox strategy to spur economic growth.
The lira’s slide is the latest turbulence to hit the Turkish economy after years in which Mr. Erdogan has repeatedly intervened at the central bank to install officials who support his demands for lower interest rates. He has fired three central-bank chiefs in three years and replaced other top officials.
The bank is expected to further cut rates on Thursday after Mr. Erdogan again demanded lower interest rates on Wednesday, citing a Muslim religious prohibition on usury, in a speech to members of his political party.
The central bank’s repeated rate cuts have added to inflationary pressures in Turkey. Inflation reached nearly 20% in October, according to official measures.
Economists and investors are increasingly concerned that rapid inflation could pose risks for the broader economy. The weakening currency makes it harder for Turkey to repay its foreign debts. Ankara must repay or renew debts equal to about a quarter of its gross domestic product over the next year.
“It’s on a destabilizing path if this continues," said Erik Meyersson, a senior economist at Swedish bank Handelsbanken.
Pressure on wages and the rising cost of basic goods such as food, medicine and energy have eroded Mr. Erdogan’s support base in Turkey, presenting one of the most serious challenges he has faced in nearly two decades of ruling Turkey as both prime minister and president.
Mr. Erdogan’s approval rating dropped to 38.9% in October, down 2.5% from the previous month, according to MetroPOLL, a leading Turkish polling outfit. Turkey’s two top opposition leaders called on Wednesday for an early election amid the growing turbulence in the economy.
This story has been published from a wire agency feed without modifications to the text
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