The beleaguered Turkish currency reached another record low against the U.S. dollar Monday, a day after President Recep Tayyip Erdogan stood firm on his policy to lower interest rates despite rising consumer prices and slammed business groups that called for a change of course.
The lira tumbled to an all-time low of 17.70 against the dollar — more than 7% weaker from Friday’s close. The Turkish currency has depreciated by more than 55% against the dollar since the start of the year.
Even though official figures show that annual inflation has accelerated to 21%, the Central Bank has cut a key interest rate by 5 percentage points — to 14% — since September. The bank is widely believed to be acting under pressure from Erdogan, who has proclaimed himself an enemy of interest rates and dismissed three bank governors over reported disagreements on borrowing costs.
Erdogan has long argued that high interest rates cause inflation, contrary to conventional economic thinking. He has vowed to keep rates low and prioritize growth, exports and employment.
The weakened lira is driving prices higher, making imports, fuel and everyday goods more expensive. Many people in the country of more than 83 million are struggling to buy food and other basic needs.
Erdogan vowed Sunday to continue to keep interest rates low, citing Islamic teachings against usury, saying: “Don’t expect anything else from me.”
In separate speeches Sunday, he also pledged to bring inflation down to 4% as his government has done in the past. He dismissed speculation that his government may implement capital controls by expressing commitment to free market rules.
The Turkish leader later took a swipe at TUSIAD, a group of Turkey’s top businesses, which had urged the government to return to “the generally accepted rules of economics.”
“You have one duty, and that is investment, production, employment and growth,” Erdogan said. “Don’t seek different ways to attack the government. ... You cannot win a fight against us.”
