the Turkish Lira reached an all-time low on Thursday, September 22, at more than 18.40 pounds per dollar, shortly after the announcement of a new interest rate cut. The Central Bank of Turkey lowered its main reference rate by one point for the second consecutive month, from 13% to 12%, once again justifying its decision by “uncertainties about global growth and geopolitical risks.” Down very slightly from its morning high, the Turkish currency was trading just before noon GMT above 18.38 pounds per dollar.
The Turkish President Recep Tayyip Erdogan, which says it favors growth and exports over price stability, called for more cuts in interest rates in June, which had been stable since December. Contrary to classical economic theories, Mr. Erdogan claims that high interest rates promote inflation. The Central Bank of Turkey is officially independent, but in recent years it has seen a waltz of its governors, ousted by presidential decrees. As a result of its highly criticized monetary policy, the Turkish lira – which had already lost 44% of its value in 2021 – has fallen more than 27% against the dollar since January 1.
Interventions by the central bank to buy Turkish liras in the foreign exchange market and the announcement in late June of a measure to support the national currency had little effect. Inflation reached 80.2% year-on-year in August in Turkey(…)
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