Istanbul: Lira Turkey on Thursday hit a fresh low after the central bank fired the latest Salvo at President Recep Tayyip Erdogan “independence economic war” by cutting interest rates for the fourth consecutive month.
The main tariff reduction of up to 14 of 15 percent is present in the face of the annual inflation rate that has jumped 20 percent and is expected to rise higher over the next few weeks.
Lira traded more than five percent after the announcement.
“The accompanying statement shows that the easing cycle will stop early next year but, even so, Lira will remain under pressure and control of the capital’s possibility,” said the capital economic consultation in a research note.
Lira has shed more than half of its value since January – and almost 40 percent since early November – as policy makers submit to Erdogan’s desire to reduce loan costs despite soaring inflation.
This Unortodox approach has destroyed the value of people’s savings and throws Turkish plots below the official poverty line.
One dollar can buy three liras in 2016 and 7.43 liras at 1.
It was worth 15.60 liras on Thursday after opening the week around the 13.80 mark.
Erdogan called for “patience” and argued that his approach would ultimately make Turkey less dependent on external factors such as the scale of foreign investment and import commodity prices.
He also promised to increase a clean minimum wage of 50 percent starting next year.
It will stand at 4,250 liras – now worth around $ 275 (240 euros).
“We are determined to end (price fluctuations) as soon as possible,” he said at the address broadcast on television.
– Pause possible? – Analysts and Diplomats believe Erdogan releases pro-growth policies in an effort to revive the number of slack agreements ahead of general elections because in the next 18 months.
Veteran Turkish leaders try to fight inflation rotating by reducing loan costs – the opposite of what countries are usually done in the same situation.
Central banks throughout the world currently raise interest rates or reduce their low-cost policies to combat consumer price leap caused by factors related to the coronavirus pandemic.
The Turkish central bank promised to reassess “all aspects of the policy framework” for the first three months of 2022.
However, uncertain analysts what this review will require.
“I think the central bank must explain this,” Turkish Chase Chase Economist Chase JPMorgan Yarkin Cebeci to Bloomberght Television.
“I really don’t know whether they will develop new policies or try new experiments.” – ‘No Prainas’ – Erdogan has quoted China for example as he encourages economic growth with all costs.
China decreases the value of its currency to help export and reach the level of spectacular economic expansion of most of the past two decades.
This creates a new middle class that helps China achieve growth driven by more sustainable consumers.
Turkey’s economy was also expanded at an annual rate of 7.4 percent between July and September.
But most analysts believe that Erdogan’s efforts to increase work and encourage economic expansion through cheap exports tend to end with social turmoil.
Official data shows basic prices such as pasta and potatoes increased by around 50 percent from November 2020.
One of the senior officials of Western said Erdogan felt “not stuck” after stacking the central bank with allies and billing ministers who refused to subscribe to his unconventional views.
“There is no one around him who can control this fundamental belief, whether it comes from the Islamic principles, or the shopkeeper’s mentality, or a combination of both – he really thinks this will succeed,” Western official said.