Turkish lira drops to historic low amid price hike

ANKARA: The Turkish currency has slid to a historic low of over 10 liras against the dollar, and its devaluation seems far from over as it may dip further if the central bank decides on another interest rate cut on Thursday, experts said.

The currency touched the all-time low last Friday evening, passing a major psychological and symbolic mark over inflation worries in Turkey and abroad.

On Tuesday, the lira continued its dive to another record low, losing 1.17 per cent and traded at 10.17 per dollar. The Turkish currency has lost over 25 per cent of its value since the start of the year.

Turkey is import-reliant on energy and other goods, and amid a global uptick in energy prices along with the depreciation of lira, households are feeling the pain of repeated price hikes on most items, especially food.

“Price increases are much higher than the written inflation,” according to monthly data of the official Turkish Statistical Institute, Enver Erkan, chief economist at Istanbul’s Tera Securities, said in a note to investors.

He argued that this situation will further push citizens to buy dollars, euros or gold to protect their savings against high inflation which is just under 20 per cent annually.

State sugar company Turkseker raised prices by 25 per cent on Tuesday, another latest bad news for consumers.

The lira may well slide further against foreign currencies as the central bank is expected to cut its policy rate again this week, according to specialists, continuing an easing cycle despite rising inflation.

The monetary institution has cut its benchmark policy rate by 300 basis points since September to 16 per cent. It is expected to slash the rate by 50 to 100 basis points when its Monetary Policy Committee gathers on Thursday, said Erkan.

Turkish President Recep Tayyip Erdogan insists on low interest rates to boost credits and exports amid a vulnerable economy made worse by the fallout of the Covid-19 pandemic.

According to the survey results, the most urgent problems of Turkey are the economy, unemployment and difficulties in making ends meet.