Advertisement
Advertisement
Advertisement
Advertisement
Lira plunges again after Erdogan defends rate cuts

Lira plunges again after Erdogan defends rate cuts

Lira plunges again after Erdogan defends rate cuts

President Recep Tayyip Erdogan of Turkey. Image: File

Advertisement

ISTANBUL: Turkey’s troubled lira nosedived on Monday after President Recep Tayyip Erdogan justify not to raise the interest rates to stabilise the currency.

Erdogan has pushed the central bank to sharply lower borrowing costs, despite the annual rate of inflation soaring to more than 20 per cent.

Economists believe the policy could see consumer price increases reach 30 per cent or higher in the coming months. But Erdogan said in remarks aired by the state television late Sunday that his Muslim faith prevented him from supporting rate hikes.

“They complain we keep decreasing the interest rate. Don’t expect anything else from me,” he said in the televised comments.

“As a Muslim, I will continue doing what our religion tells us. This is the command.”

Advertisement

Erdogan has previously cited his religion in explaining why he believes interest rates cause inflation instead of reining it in. High interest rates are a drag on activity and slow down economic growth. But the central banks raise their policy rates out of necessity when inflation gets out of hand.

The Turkish lira has now lost nearly half its value in the last three months alone. It was trading down over 6 per cent against the dollar on Monday afternoon.

A dollar could buy 7.4 liras on January 1. It was worth 17.5 liras on Monday.

“You cannot run a modern economy integrated into the global economy on this basis,” economist Timothy Ash of BlueBay Asset Management said in a note to clients.

“Even Saudi Arabia really does not attempt full Shariah-compliant macro (economic) management.”

Fight with big business

Advertisement

Turkey’s nominally independent central bank, stacked last year with Erdogan’s allies and supporters, has used four successive rate cuts to lower its policy rate to 14 per cent from 19 per cent.

Diplomats think the powerful but increasingly unpopular Turkish leader believes that the economic growth at all costs will help him extend his rule into a third decade in an election due by the middle of 2023.

Erdogan last month launched a self-declared “economic war of independence”, aimed at breaking Turkey’s dependence on foreign investment and the fluctuating cost of imports such as oil and natural gas. But the policy is meeting increasing resistance from powerful business leaders who had largely rallied around Erdogan during his 19-year rule.

The TUSIAD big business lobby of major exporters issued an unusually firm rebuke of the president over the weekend.

“The policy choices implemented here are not only creating new economic problems for businesses, but for all of our citizens,” the big business lobby said.

“It is urgent that we assess the damage that has been done to the economy, and quickly return to the implementation of established economic principles, within the framework of a free market economy.”

Advertisement

Erdogan attacked TUSIAD directly in his televised comments.

“I am calling you out,” he said. “You have only one job: to ensure investment, production, employment and growth.”

Also Read

Turkish lira slides ahead of likely interest rate cut
Turkish lira slides ahead of likely interest rate cut

ISTANBUL: The Turkish lira on Wednesday extended its historic slide on the...

Advertisement
Advertisement
Read More News On

Catch all the Business News, Breaking News Event and Latest News Updates on The BOL News


Download The BOL News App to get the Daily News Update & Follow us on Google News.


End of Article

Next Story