ISTANBUL, Turkey — The Turkish lira
plunged to record lows Tuesday after President Recep Tayyip Erdogan stuck to
his support for interest rate cuts, warning his country was in a "war of
economic independence.”
اضافة اعلان
The Turkish currency exchanged hands at more
than 13 lira to the dollar, a 15 percent fall, before recovering slightly from
the historic drop.
Turkey is facing the worst currency crisis
since August 2018 when the value of the lira hit historic lows during a row
with then US president Donald Trump.
The Turkish central bank on Thursday bowed
to pressure from Erdogan and cut its policy rate from 16 to 15 percent despite
rising inflation and a fast-depreciating currency.
"Traders have finally been tipped over the
edge and completely lost patience with the policies being carried out by the
central bank," Craig Erlam, senior market analyst at OANDA, told AFP.
"There's a reason why central banks are
independent and this is what happens when the divide is crossed. A perfect
storm of politically driven monetary policy, a complete disregard for inflation
and other central banks taking a more sensible approach," he said.
Erdogan, an outspoken opponent of high
interest rates, has always built his popularity on a reputation of forging
strong economic growth and improving the income of families across the country.
He is notorious for his unorthodox belief
that high interest rates cause inflation instead of helping tamp it down.
The Turkish leader was defiant and defended
the current policies in an address to the nation after a cabinet meeting on
Monday.
"We see the game played by those over
the currency, interest and price hikes ... and show our will to proceed with
our own game plan," he said.
"We will emerge victorious from this
war of economic independence with the help of Allah and our people."
'Admit you're
wrong'
The lira has lost more than 40 percent of
its value against the dollar since the start of the year and the annual
inflation rate has reached nearly 20 percent — quadruple the government's
target.
The Turkish minimum wage was worth around
$380 in January and after Tuesday's volatility, it is now worth $224 based on a
net monthly wage of 2,825.90 liras.
"Surely someone in the palace has the
guts to tap Erdogan on the shoulder and say, 'hey dude, you really screwed
up'," BlueBay Asset Management economist Timothy Ash said in an email to
clients.
"'Admit you were wrong, move aside and
let someone who knows what they are doing run the CBRT (central bank)',"
he said.
The central bank has lowered its policy rate
by 4 percentage points to 15 percent since August.
After the lira crash Tuesday, Erdogan met
with central bank governor Sahap Kavcioglu, according to local media, which
provided no further information.
The bank later Tuesday defended its
position, saying "exchange rates are determined by supply and demand
conditions according to free market dynamics" in a statement.
"Under certain conditions, the Central
Bank may only intervene in excessive volatility without aiming any permanent
direction."
Analysts believe the blizzard of economic
misfortunes in the country could put pressure on Erdogan as he prepares for
2023 elections amid signs of consolidation within the opposition, which has so
far failed to seriously challenge him.
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