Overall, the exchange rate of the lira against the US dollar has fallen by nearly 40% since the beginning of this year.
Turk lira After President Recep Tayyip Erdogan defended the recent sharp interest rate cuts, the U.S. dollar exchange rate hit a record low of 12.49 against the U.S. dollar. The Turkish currency plunged 8% on Tuesday.
The lira has depreciated 40% this year, including a drop of nearly 20% since the beginning of last week. The euro-euro exchange rate fell to a record low of 13.4035.
Erdogan said in the capital Ankara late Monday that lower interest rates will help stimulate economic growth and create jobs.
Erdogan has put pressure on the central bank to shift to a positive easing cycle, he said, aimed at promoting exports, investment and employment-even if inflation soars to nearly 20%, currency devaluation accelerates, severely eroding Turks’ income.
The President of Turkey defended an unorthodox theory that higher interest rates lead to higher inflation.
However, most economists believe Turkey Facing a huge crisis, including high inflation, in case interest rates continue to fall in the coming months.
Under Erdogan’s pressure, the central bank lowered the key interest rate from 19% to 15% in September, pushing the lira to fall freely.
Erdogan has replaced three central bank governors in the past two years, which has weakened investor confidence.