Turkish Lira enters freefall as President Erdogan vows ‘economic war’

GMB: Kyriakos Mitsotakis discusses Turkey's immigration 'threat'

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

The Lira is now worth only $0.078 (£0.06), down from $0.088 (£0.064) earlier this morning. The fall comes following comments from President Erdogan defending a recent sharp cut in interest rates. Speaking yesterday Mr Erdogan vowed to succeed in what he called his “economic war of independence”. Turkey is also experiencing record levels of inflation with food and fuel prices spiralling and many people looking to convert their Liras into more stable forms such as gold or dollars.

Speaking to Express.co.uk, Senior FX Market Analyst at Monex Simon Harvey suggested the economic situation in Turkey would leave President Erdogan “feeling the pressure.”

He explained the president would have an eye on the next elections in 2023 but this would be “made very difficult by double digit inflation.”

People in Turkey are particularly aware of the devaluing of their currency which many take as a direct indicator of the health of the economy.

Mr Harvey described it as “like the FTSE100 here.”

In his address President Erdogan insisted: “I reject policies that will contract our country, weaken it, condemn our people to unemployment, hunger and poverty”.

The Turkish president has been a long-standing opponent of interest rates describing them as “the devil”.

He believes keeping interest rates low will keep inflation down, a view not shared by most mainstream economists.

In Turkey’s case this has made dealing with rampaging inflation all the harder.

Last Thursday Turkey’s central bank lowered interest rates even further from 16 percent to 15 prompting a further decline in the Lira.

Mr Erdogan wields considerable influence over the central bank, having gone through four governors in less than two and a half years.

Mr Harvey explained the big emphasis for the central bank was “how to abide by this pressure without creating a currency crisis.”

When it cut rates on Thursday the bank suggested this would be the last cut for a while in an attempt to reassure markets.

DON’T MISS:
Good news for savers as bank increases ‘table-topping’ interest rates [ANALYSIS]
Atom becomes largest company to introduce four day week [REVEAL]
Interest rate rise warning [LATEST]

However, the recent comments from Erdogan suggest the political pressure will remain, killing off the prospect of any pause.

Mr Harvey said: “The damage is done” adding it was now a “case of how they can manage it and create a softer landing for the Lira.”

President Erdogan has seen political support increasingly erode over time particularly in metropolitan areas.

In 2019 Turkey’s opposition party won the Istanbul mayoral elections following a re-run.

Source: Read Full Article