The lira falls by 3% … and the Turkish economy goes into the unknown

The Turkish lira fell to a new low on Wednesday record amid fears of high inflation and other economic repercussions after plunging 15% the previous day after President Recep Tayyip Erdogan defended recent interest rate cuts.

The lira fell to 13.1500 against the dollar before falling to 13.05 at 07:03 GMT. And yesterday, Tuesday, it hit an all-time low at 1.45pm.

The Turkish currency recorded lows record in 11 consecutive sessions, bringing his losses from the beginning of the year to 43%, of which about 24%, suffered since the beginning of last week.

Although Erdogan has defended the central bank’s monetary policy and promised to win the “economic war of independence”, criticism is mounting from those calling for action to stem the currency’s decline, including leading economists.

And there is no trace of intervention to stop the collapse. The Turkish central bank said Tuesday that it could only do so under certain conditions with “excessive volatility”.

“At current exchange rates, official inflation could exceed 30% in the coming months,” former central bank chief economist Hakan Kara tweeted.

“If urgent action is not taken, the financial system will not be in able to cope with it, “he added.

Erdogan has lobbied the central bank to cut interest rates with the aim, he says, of increasing exports, investment and employment even as inflation rises to nearly 20% and currency depreciation accelerates, hitting the earnings of the Turks seriously.

The drop in the lira on Tuesday was the largest since the height of the currency crisis in 2018, which triggered a severe recession, cut three years of growth and pushed double-digit inflation.

The central bank has cut interest rates by 400 basis points since September.

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