The crisis continues – the Turkish lira falls to a new low

by time news

The Turkish lira has fallen to a new low today following new statements by Turkish President Erdogan not to raise interest rates. The Turkish currency has reached a low of 13.47 pounds to the dollar in trading today, surpassing its previous record last week of around 13.45 pounds to the dollar, following renewed concerns about the president’s policy and fears that have resurfaced following the Omicron variant.

The drop in the pound is unprecedented – it dropped from about 8.5 pounds to the dollar at the end of August to a low of more than 13 pounds to the dollar in just three months, and since the beginning of the year it has fallen against the dollar by 60%, and 73% in five years.

>>> Give you a gift – will not take? BizPortal’s experts will teach you investing (at no cost) – To register for the course

Erdogan has consistently refused to raise interest rates despite the raging inflation in the country, which currently stands at 20%, which has caused the pound’s value to fall steadily in recent years. Two weeks ago, he even caused the country’s central bank to lower interest rates twice more from 18% to 15% – which in the meantime does not really stop the fall of the local currency, and economists will say the opposite. Instead of looking in the mirror, Erdogan by the way, accuses the West of deliberately harming the Turkish economy.

Erdogan’s non-economic policy states that inflation is stopped by lowering interest rates. It has not worked before and there is no reason for it to work now. But Erdogan is not interested in listening to advice but in showing that he is doing something. The problem is that its citizens are the ones paying the price

What did Erdogan do? During his tenure, Erdogan managed to fire three central bank heads for failing to align with his belief that interest rates should not be raised.

“I have always argued for lowering interest rates and reiterated that interest rates should be lower. I have never supported or will support interest rate hikes,” Erdogan was quoted as saying in the Turkish press on Sunday.

Economic experts and former officials in the country have openly urged the president to change course but Erdogan has long held to the unusual approach that higher interest rates cause inflation, rather than bring it down. “Interest is the reason, inflation is the result. My argument has not changed, I still defend it, believe in it,” the president said.

The pound crisis is casting a heavy shadow over growth in the country’s GDP. Although Turkey reported positive GDP growth figures this week, the weak value of the currency outweighs the positive news, said Tim Ash, a senior strategist in emerging markets at BlueBay Asset Management.

The pound against the shekel: a fall of 47% since the beginning of the year
The Turkish lira is already trading at 23 cents for one shekel, while just months ago it was trading at 37 cents. Since the beginning of the year, it has fallen by 47%, and who remembers that in September 2016 its price was NIS 1.25?

Since the beginning of the year, the Turkish lira has fallen by almost 30%, completing a decline of more than 80% in the last five years.

Comments on the article(0):

Your response has been received and will be published subject to system policies.

For a new response

Your response was not sent due to a communication problem, please try again.

Return to comment


You may also like

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.