The lira fell on the eleventh trading day in a row, its longest negative streak in 20 years.
The Turkish lira fell as much as 15% on Tuesday and recorded the second worst day in its history. Turkish President Recep Tayyip Erdogan on Monday (November 22) called for the central bank to make a significant rate cut and declared that Turkey would win the war for economic independence.
Turkey’s central bank has cut interest rates sharply in recent months, despite rising inflation, when it came under pressure from Erdogan and lost the last vestige of confidence in its independence. After Erdogan’s speech, experts fear that the monetary easing cycle may not end yet.
The lira exchange rate weakened by as much as 15% on Tuesday and reached 13.45 TL / USD. The lira later erased some losses and traded minus 8.2% in the late afternoon at 124,062 TL/USD.
The lira fell for the eleventh consecutive day, the longest negative streak in 20 years, and has only depreciated by nearly a third since early November. It’s down 45% since the start of the year and about 26% since the start of last week.
Meeting with the Governor of the Bank
According to media reports, Erdogan met with Central Bank Governor Sahab Kavcioglu unplanned on Tuesday. However, the content of their interview is unknown.
Under pressure from President Erdogan, Turkey’s central bank has cut interest rates by 400 basis points since September, causing real rates to drop below zero. Inflation in the country accelerated to nearly 20% in October. According to Erdogan, the monetary policy easing aims to support exports, investment and job creation.
Many economists see interest rate cuts in Turkey as dangerous and the opposition calls for early elections. Former Turkish Central Bank Deputy Governor Semih Tumen, who was sacked by Erdogan in October, has called on the central bank to return to a monetary policy that protects the value of the lira. “This irrational experiment has no chance of success, it must end immediately and we must return to a quality policy that protects the value of the Turkish lira and the prosperity of Turkish citizens,” Tumen said on Twitter.
Tuesday’s false slowdown was the steepest since the currency crisis in 2018, which triggered a deep recession and caused weak growth for the economy in subsequent years and double-digit inflation.
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