Turkey’s lira at record low, central bank cuts rates again

Turkey’s currency traded at a record low against the dollar on Thursday as the country’s central bank cut rates again, urged by President Recep Tayyip Erdogan, despite rapid inflation that threatens Turkey’s broader economy. And a challenge for the leader in the long run.

The central bank cut its key rate by 100 basis points to 15% from 16% in line with market expectations.

Earlier on Thursday, the lira fell to 10.97 against the dollar before rebounding slightly ahead of a central bank meeting. The currency has lost nearly 8% of its value since Monday as Mr. Erdogan reiterated calls for lower interest rates as part of his unconventional strategy to boost economic growth.

The lira’s slide is the latest unrest to affect Turkey’s economy after years in which Mr. Erdogan repeatedly intervened at the central bank to install officials backing his demands for lower interest rates. He has fired three central bank chiefs and replaced other top executives in three years.

The bank is expected to cut rates further after Mr Erdogan called for a further interest rate cut on Wednesday, citing Muslim religious taboos on usury, in a speech to members of his political party.

Repeated rate cuts by the central bank have added to inflationary pressures in Turkey. According to official measures, inflation reached around 20% in October.

Economists and investors are increasingly concerned that rapid inflation could pose risks to the broader economy. A weak currency makes it difficult for Turkey to repay its foreign debts. Ankara will have to repay or renew a loan equivalent to about a quarter of its GDP during the next year.

“It is on a volatile path if this continues,” said Eric Meyerson, a senior economist at Swedish bank Handelsbanken.

Pressure on wages and rising costs of basic goods such as food, medicine and energy have eroded Mr. Erdogan’s support base in Turkey, the biggest before him in nearly two decades of Turkey’s ruling as both prime minister and president. One of the serious challenges. ,

Mr. Erdogan’s approval rating fell to 38.9% in October, down 2.5% from the previous month, according to MetroPOLL, a leading Turkish polling organization. Turkey’s two top opposition leaders called for early elections on Wednesday amid growing turmoil in the economy.

This story has been published without modification to the text from a wire agency feed