Tue. Dec 7th, 2021

In general, the lira has lost nearly 40 percent of its value against the dollar since the beginning of the year.

The Turkish read reached a record low of 12.49 against the US dollar after President Recep Tayyip Erdogan defended recent sharp rate cuts. The Turkish currency collapsed by eight percent on Tuesday.

The lira has lost 40 percent of its value this year, including a nearly 20 percent tumble since the beginning of last week. Against the euro, the currency weakened to a new record low of 13.4035.

Lower rates will help spur economic growth and create jobs, Erdogan said late Monday in the capital, Ankara.

Erdogan has put pressure on the central bank to turn to an aggressive easing cycle that he says aims to boost exports, investment and jobs – even as inflation rises to almost 20 percent and the depreciation of the currency accelerates, eating deep into the Turks’ earnings.

The Turkish president defends an unorthodox theory that higher interest rates cause higher inflation.

However, most economists argue Turkey faces a major crisis, including high inflation, in case rates continue to fall in the coming months.

Under pressure from Erdogan, the central bank cut key interest rates from 19 to 15 percent in September, causing a free fall in the lira.

Erdogan has replaced three central bank executives over the past two years, undermining investor confidence.

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