After Erdogan defended interest rate cut, the Turkish lira plummeted by 10%

The Turkish currency fell by nearly 10% against the U.S. dollar. The day before, Turkish President Recep Tayyip Erdogan insisted that despite the high inflation rate, his unconventional interest rate cut policy would not Withdraw

Ankara, Turkey-On Tuesday, the Turkish currency fell nearly 10% against the US dollar. The day before, Turkish President Recep Tayyip Erdogan insisted that despite the high inflation rate, his unconventional interest rate cuts The policy will not go back.

The exchange rate of the lira against the US dollar fell to a historical low of 12.51, down 9.9% from Monday’s closing price. The exchange rate of this currency to the euro is 14.08. Since the beginning of this year, the lira has depreciated by about 40%.

Erdogan once declared himself an “enemy” of high borrowing costs. He described his economic policy as “an independent economic war” in a televised speech to the nation late at night. He made it clear that his government will not withdraw from the policy of lowering lending rates to promote growth.

Contrary to traditional economic theory, Erdogan believes that high interest rates will lead to inflation. Normally, the central bank will raise these interest rates to curb rising consumer prices.

Erdogan said: “Either we stick to the understanding that has prevailed in our country for many years, or we must give up investment, production, growth and employment, or we must fight historically based on our priorities.” “As always, we prefer to fight. .”

“We are determined to do the right thing for our country,” he continued. “We encourage investment, production and exports. … We protect employment. … We care about growth.”

The Central Bank of Turkey has cut interest rates by 4 percentage points since September, raising concerns about its independence from the Erdogan government. Since 2019, the president has fired three bank governors.

The inflation rate is around 20%, eroding the purchasing power of the public.

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