The Turkish lira plunged to a new record, its lowest ever, at 12.49 lira against the US dollar as Turkish President Recep Tayyip Erdogan defended his interest rate cut.
The lira fell to 12.49 per dollar, falling for the eleventh session in a row. The currency has lost 40% of its value this year, including a decline of about 20% since the beginning of last week. The lira was trading at 12.32 at 1048 GMT.
Erdogan defended his quest to lower interest rates To boost economic growth and create jobs, which pushed the lira to a new record low against the dollar.
Erdogan said Turkey has abandoned old policies based on high borrowing costs and a strong currency in the name of slowing inflation, and instead shifted to a new system that prioritizes increasing investments and exports and creating strong jobs.
“We had two options, either we abandon investments, manufacturing, growth and jobs, or we face a historic challenge to meet our priorities,” he added after a cabinet meeting in the capital, Ankara.
This comes, while most central banks talk about tightening monetary policy, as the global recovery fuels high prices, but Turkey’s decision came in the opposite way after it cut interest rates by 4 percentage points since September, which confused markets and frustrated investors who complain that its monetary policy has become increasingly volatile and unpredictable.
Erdogan’s pledge to redouble his recent efforts to cut the cost of funding sent the lira down after the Turkish markets closed, as it fell 2.1% to 11.4767 per dollar and was trading 0.9% lower at 11.3804 per dollar.
During his speech, Erdogan said, there is a “game” being played against Turkey by those who use interest rates, currency exchange rate and inflation.
He added, “We are pleased to see that the interest rate of the Central Bank is kept low.”
He pledged that Turkey would crack down on “unfair and inexplicable price increases” by those who use the weak lira as an excuse.
“We know very well what we are doing with the current policy, why we are doing it, what kind of risks it entails and what we will achieve in the end,” Erdogan emphasized.