Erdogan remains stubborn - Turkish lira falls to new historical low
Created: 12/14/2021, 08:23 AM
From: Matthias Schneider
The lira Turkish lira fell to an all-time low on Monday.
President Recep Tayyip Erdogan is now relying on radical measures.
Ankara - Turkey has been suffering from particularly high inflation for a long time.
On Monday, the local currency, the lira, fell another four percent to a historic low ahead of an interest rate decision on Thursday.
But while the American central bank, the Fed and the European ECB - together with the majority of economists - see an increase in the key interest rate as the solution, the Turkish President Recep Tayyip Erdogan does not want to know anything about it.
Experts assume that he is not familiar with economics.
Turkey: Erdogan is fighting against higher interest rates
The last time there was inflation in Turkey was up to 21 percent.
For comparison: In Germany in November it was 5.2 percent who are now pushing the big business and ex-politicians on the barricades.
But Erdogan is a declared opponent of high interest rates because, in his eyes, they fuel inflation.
That is why the key interest rate has been reduced by four percentage points since late summer.
Erdogan has already reorganized the top bank several times and brought staff into office from whom he expects less headwind for his monetary policy ideas.
The result: the lira has lost around half of its value since the beginning of the year.
Erdogan's confidante as finance minister
At the beginning of December, Erdogan Nureddin installed Nebati as finance minister, who repeatedly emphasized his loyalty to the president.
In an interview with the
Habertürk
newspaper
on Monday, Nebati said he would never go against the will of his “leader” Erdogan.
He cannot comment on the question of whether interest rates will be further reduced, but he ruled out a key rate hike.
Turkish central bank tries to save the lira
The central bank has recently tried to counteract the weakness of the lira by intervening in the currency market every now and then.
So far, interventions have only brought short-term relief.
The interventions do not change the root cause of the lira weakness either.
The central bank itself speaks of an unhealthy price development, said Commerzbank expert Tatha Ghose.
"In reality, however, the central bank's monetary policy is unhealthy."
Read everything about President Recep Tayyip Erdogan's plans for Turkey here.
