The Turkish lira continues to plummet and today (Tuesday) sets an all-time negative record, after yesterday Turkish President Recep Tayyip Erdogan again spoke out in favor of the controversial policy of lowering interest rates
The strange policy that will lead to Erdogan’s defeat? “Disaster Recipe”
The dollar jumped today by more than 9 percent against the pound, which is trading at more than 12 pounds to the dollar. When the Turkish lira for more than a week breaks records of lows. The currency has lost more than 40 percent in value this year, including a 20 percent drop in the past week.
Yesterday, Erdogan claimed that Turkey had abandoned the old policy based on raising interest rates, a strong currency and slowing inflation in favor of what he claims strengthens exports and creates new jobs.
While most central banks are talking about tightening their policies following the recovery of the economy and rising prices, in Turkey they are sticking to the decision to lower interest rates – which frustrates investors and shocks the markets. “Either we give up investment, production, growth and jobs or we take on a historic challenge that will serve our priorities.”
President Erdogan, contrary to popular belief, put pressure on the central bank. Former central bank governor Samih Tuman, ousted by Erdogan, called for an immediate return to a policy that would protect the local currency. “This irrational experiment that has no chance of succeeding must be abandoned immediately,” he tweeted. “We must return to a quality policy that will protect the Turkish lira.”
The pound is showing the worst results in its history following a policy dubbed by analysts as irresponsible and immature monetary policy.
“Prices are rising too fast,” Khan Akar, a hotel manager in southern Turkey, told Reuters. “I do not want to buy anything because everything is so expensive. The blame is on President Erdogan, the AKP government and those who for years turned a blind eye and supported them.”