Recep Tayyip Erdogan has very own ideas about financial policy.
Now the lira has fallen to a record low - and the central bank is reacting surprisingly.
Ankara
- For the first time in two years, the
Turkish central bank raised the key interest rate
.
The monetary authorities set the interest rate on Thursday at 10.25 percent.
It had previously been 8.25 percent.
The decision is a big surprise: According to observers, the central bank is actually under considerable pressure from Turkish President
Recep Tayyip Erdogan
- he is demanding low interest rates.
They are intended to support the economy.
In fact, the
lira
, which had recently come under great pressure,
got a boost again thanks to the interest rate decision of the central bankers.
According to the central bank's announcement, the Turkish currency rose by around one percent.
It had previously
fallen
to an
all-time low of 7.71 against the dollar
on Thursday morning
.
Erdogan and the lira crisis: turning point in Turkish monetary policy - against the will of the president?
The rate hike marks a turnaround in
Turkish monetary policy
.
In September 2019, the central bank began to cut interest rates.
The key interest rate had previously been 19.75 percent.
Pressure on the central bank is getting bigger and bigger $ 500 million gone for nothing: Lira falls to record low despite bank aid # Turkey #Lira #CentralBankhttps: //t.co/d4jK4nwrla
- Georg Erber (@PhraAthit) September 18, 2020
From the point of view of most economists, a rate hike was actually long overdue.
The
Turkish lira has
recently been under severe downward pressure and fell to
record lows
against
both
the dollar
and the
euro
.
The
annual
rate of inflation was
almost 12 percent
in August
, and inflation was exacerbated by the currency collapse.
Turkey: Economy under strong pressure - Corona hits the country hard
In such a situation, monetary authorities tend to tighten their monetary policy - for example by raising the key interest rate.
In the past, however,
Erdogan
had repeatedly asked for low interest rates to support the economy.
The
Turkish economy
is currently under severe pressure.
The country was
hit hard
by the
Corona crisis
and is suffering from a
severe recession
.
But the foreign policy conflicts with Greece and Cyprus are also undermining trust.
The rating agency Moody's
recently downgraded Turkey
's
creditworthiness and at the same time threatened a further downgrade.
In this situation Erdogan had also built on natural gas discoveries - but even a widely heralded "new era" did not give the currency new strength in August.
On the contrary.
Because of the dispute over resources in the Mediterranean, Turkey is in a very fundamental dispute with the EU.
(
dpa / AFP / fn
)
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