Turkish lira hits record low after Erdogan interest rate comments
ISTANBUL: Turkey’s lira weakened to a record low of 4.9767 against the dollar in overnight Asian trade before trimming losses yesterday, hit by worries about economic management and monetary policy under Tayyip Erdogan’s stronger executive presidency.
The lira has shed some 22 per cent of its value against the US currency so far this year as investors fret over President Tayyip Erdogan’s influence on monetary policy and his repeated calls for lower interest rates.
“We have many instruments. I believe we will see interest rates fall in the period ahead,” the Hurriyet newspaper cited Erdogan as telling reporters after his first foreign trip following his inauguration.
“I am sure not just our state banks but our private banks will shoulder responsibility if necessary.”
The central bank’s monetary policy committee, which has raised rates by 500 basis points since April in an effort to underpin the currency, will next meet on July 24.
“Erdogan said yesterday interest rates must fall,” said a treasury desk trader at one bank. “This has been interpreted as a desire for a Turkish central bank rate cut at a time when additional tightening is expected and inflation has exceeded 15 per cent.”
The lira weakened as far as 4.9767 in Asian trade before rebounding to 4.8300 at 0615 GMT on Thursday.
Erdogan described high interest rates as “the mother and father of all evil” before last month’s elections and he has repeatedly expressed his desire for lower borrowing costs to spur economic growth.
Investors believe the creditfuelled economy is overheating and want decisive interest rate hikes to tame double-digit inflation.
Hours after being sworn in with new powers as executive president on Monday, Erdogan appointed his son-in-law Berat Albayrak to the key post of treasury and finance minister.
The main share index fell 5 per cent on Wednesday, while banking stocks shed more than 9 per cent in their worst day for five years after media quoted Erdogan as saying he believed interest rates would fall and that Albayrak will do what is necessary. — Reuters