Turkish lira falls further after President Erdogan’s Islam reference over low interest rates

©  via REUTERS

The Turkish currency has hit another new low. That happened after Turkish President Recep Tayyip Erdogan promised to continue cutting interest rates. In doing so, he referred to Islamic precepts as the basis for his policy.

mtmSource: BELGIAN

The lira has weakened more than 6 percent against the dollar. That marked the fifth day in a row that the currency has lost value. In the past three months, the lira has lost 50 percent of its value.

“What it is? We are lowering the interest. Don’t expect anything else from me,” Erdogan said on television on Sunday. “As a Muslim, I will continue to do what is required.” In doing so, Erdogan used an Arabic word used in Turkish to refer to Islamic teachings. It is the second time in a month that Erdogan has invoked religion to justify the current monetary stance.

Inflation in Turkey is very high, but under pressure from Erdogan, the central bank has cut interest rates repeatedly since September. Erdogan prefers to see interest rates as low as possible because he believes that high interest rates lead to higher prices. The usual policy of economists is to raise interest rates to curb inflation. The largest corporate lobby in Turkey has already called on the president to stop his controversial interest rate policy because it is causing major damage to the economy.

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