The Turkish pound fell to a new all-time low on Wednesday after President Recep Tayyip Erdogan said he would continue to fight high interest rates “until the end”.
The pound fell 1.5 percent to a new all-time low of ,5 10,565 a dollar, boosting major losses following a slow and dangerous monetary easing, analysts say. The Turkish currency has fallen by almost 30% since the beginning of the year.
Erdogan said he would lift the burden of interest rates on citizens, while urging businesses to invest, recruit and increase their exports.
“We will remove this scourge of interest rates from the backs of the world. “Certainly we can not let our citizens be crushed by interest rates,” he told members of his party in parliament. “I can not and will not follow this path with those who defend interest rates,” he added.
A day before the central bank meeting, which is expected to cut interest rates again, Erdogan reiterated his unorthodox view that higher interest rates are the cause of inflation and wondered why businessmen did not take out loans to invest after interest rates fell. the last months.
Leaving Ankara, he said the central bank would decide on interest rates independently when it meets tomorrow at noon.
Investors are leaving Turkey in recent years and the Turkish lira has by far the worst performance in emerging markets. For investors, Erdogan, who has long called himself an enemy of interest rates, is influencing monetary policy with frequent calls for support and swift changes in central bank governors.
The central bank, which sees price pressures as temporary, went against market expectations and cut its key interest rate by 3 percentage points since September, despite inflation climbing to almost 20%, offering the support it was asking for. long time Erdogan.
It is expected to reduce interest rates by another percentage point to 15% tomorrow, according to a Reuters poll.
The devaluation of the pound increases inflation through higher import prices and at the same time increases the risk of bankruptcy of companies that have foreign currency loans. Devaluation, combined with inflation, has meanwhile eroded Turkish incomes.
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