On Thursday morning, the Turkish lira fell after Recep Tayyip Erdogan, the President of Turkey, called for lower interest rates prior to a crucial decision that was set to be announced by the central bank.
The troubled currency plunged to 6.54 per dollar from a high of 6.35 as the President made his position clear. It comes just hours before the meeting of the monetary policy committee of the Turkish central bank.
Erdogan is famous for his strongman tactics, which includes the jailing of tens of thousands of people after a failed coup attempt back in 2016. However, he remains to be politically popular and was just re-elected this summer, partly because of his promise to keep the borrowing rates low.
Since then, he has continued to dismiss the calls to increase the rates to address longtime woes of the country with its currency, the lira. In fact, he even calls himself as the “enemy of interest rates.”
The bank was anticipated to announce a significant increase in interest rates to slow down the inflation, however, it clearly faces political pressure from the executive president of the country.
Last week, the central bank pledged to take action after the inflation in the country reached 18 percent.
The lira was not able to gain some ground back, however, it rose to 6.44 per dollar shortly before the meeting that was held yesterday.
This year, the lira has lost approximately 40 percent of its value against the U.S. dollar, and its inflation rate sits at around 18 percent.
Right before the bank acted, Erdogan said that high interest rates were a “tool of exploitation.”
Erdogan appointed himself as the chairman of the multi-billion-dollar sovereign wealth fund of the country. The appointment extended the executive powers of his presidency.
He also named Berat Albayrak, the finance minister who is also his son-in-law, as his deputy.