The Turkish lira fell to a new low on Monday record against the US dollar, with analysts seeing little chance of recovery given what they called expectations of an “irrational” interest rate cut later this week.
The Turkish currency, the worst of the emerging market currencies questyear, touched the 9.315 level against the dollar in Monday’s trading.
The lira has lost 20% of its value questyear, and half of that decline came early last month, when the central bank began to show signs of easing, despite rising inflation to around 20%.
On October 15, President Recep Tayyip Erdogan fired three policy central bank makers, aggravating the collapse of the lira.
“These frequent movements of the members of the central bank’s decision-making committee underline the message that the Turkish central bank is not independent and is under enormous political pressure,” said Silva Demiralp, director of the Economic Research Forum at Koç University. and former Federal Reserve economist.
“The lack of credibility is unnerving the markets, not only because this means they risk deviating from their inflation target, but also because even if the bank raises rates, it will be very unlikely that the increase will be effective at this point,” she added.
Two of three central bank officials fired on Thursday opposed the 100bp interest rate cut to 18% last month, and their layoffs were seen as a prelude to further easing of monetary policy as early as next week. .
Analysts saw the move as further evidence of Erdogan’s political interference, which in he has previously described himself as an enemy of interest rates and often solicits monetary stimulus.
Read More About: Business News