Turkish Currency Collapses to a New Historic Low
Turkey's central bank is expected to cut interest rates again this week, despite the collapse of the currency and a sharp rise in inflation. President Recep Tayyip Erdogan continues to press politicians to boost economic growth ahead of elections in 2023, Reuters wrote. A fortnight ago he appointed a new finance minister, Noureddin Nebati, who supports a policy of low interest rates. On Wednesday, amid a record fall in the lira, Erdogan dismissed two deputy finance ministers.
Turkey's central bank will hold another meeting on Thursday, December 16. Analysts and economists polled by Reuters forecast that the regulator will lower the rate by 100 basis points to 14%, despite the fact that inflation in the country exceeded 21% in November. Since September, Turkey's central bank has already cut the rate by 400 basis points, to 15% per annum.
The Turkish president is against a rate hike in the country as he believes it is driving up inflation rather than curbing it. He believes low rates are necessary to stimulate economic growth, exports and credit in Turkey. The cycle of monetary policy easing in the country continues, even as most central banks around the world are tightening their policies.
In mid-March, Turkey's president fired central bank governor Naci Agbal after the regulator raised the key rate. In all, the president has already sacked three Turkish central bank governors since 2019 who opposed the rate cut.
The exchange rate of the dollar against the Turkish lira is now about double what it was at the beginning of 2021. Turkey's central bank has intervened in the market four times this month to slow the fall in the Turkish currency, which has renewed record lows against the dollar several times, the agency said.