© Reuters
Investing.com – It recorded a new historic decline against the US dollar on Thursday, due to escalating inflationary pressures and the rise of the US currency.
Despite raising interest rates to unprecedented levels of more than 30%, many economists believe that the interest rate is still below the annual inflation rate, which is close to 60%.
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Hafiza Erkan, the Turkish Central Governorate, adopted a series of measures to support the lira and make it more attractive to investors, including canceling the minimum interest rate requirements for lira accounts subject to protection from exchange rate fluctuations, which enables banks to offer lower interest rates.
Meanwhile, this week, Turkish President Recep Tayyip Erdogan expressed his support for the central bank’s monetary tightening policies, as he made another interest rate hike last week, marking a radical change from his previous stance in which he had long supported easy monetary policies.
Erdogan explained to reporters that his economic team is implementing measures to tighten monetary and credit policies with the aim of achieving price stability, and stressed that these steps will direct investments towards productive sectors with the aim of achieving strong, sustainable and balanced economic growth.
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These developments represent important support for the new economic team that includes two former Wall Street economics professors: Finance Minister Mehmet Simsek and Central Bank Governor Hafiza Erkan.
Since Erkan was appointed to her post last June, Turkey’s central bank has more than tripled its key interest rate to 30%, including a 500 basis point increase last week, and its policy has become more assertive as inflation has increased to about 60%.
President Recep Tayyip Erdogan’s support for low interest policy despite high inflation caused a currency crisis at the end of 2021, with inflation reaching more than 85% last year. The Turkish Central Bank reversed course by stopping intervention in the foreign exchange market to support the lira since June, and took two strong steps to raise interest rates within two months.
It must be noted that the Turkish lira has lost more than 25% of its value since the bank’s policy was changed, which makes the new minister’s policies for economic transformation under scrutiny. The Turkish Central Bank’s net reserve has decreased by more than $33 billion since the end of 2022, turning negative for the first time since 2002, with demand for foreign exchange rising at record rates during the election period.
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Lira and grams
The Turkish currency has declined against the dollar by 46.7% since the beginning of this year, while it has lost nearly 250% of its value over the last 3 years.
The lira is now declining against the US dollar by 2.2% to 27.42 liras per dollar.
While it fell by 1% to 28.98 liras per euro.
The value of the Turkish lira declines to 1,651 liras, by 0.5%.
2023-09-28 13:29:00
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