ISTANBUL: The Turkish lira sank to a record low against the US dollar yesterday after President Recep Tayyip Erdogan fired three central bank members in an overnight decree. The embattled Turkish currency has lost nearly a fifth of its value so far this year as market concerns over the policy-setting bank’s independence hit fever pitch.
Erdogan removed two deputy governors and a member of the monetary policy committee, according to a decision published in the official gazette. One of the dismissed bankers was reportedly the only one to vote against a surprise interest rate cut that sent the lira on a new downward spiral last month.
“The direction of travel is worrying and there can’t be many (if any) investors left that believe the central bank of Turkey is still taking the fight against inflation seriously,” analyst Jason Tuvey of Capital Economics told AFP. The Turkish lira fell overnight by around one percent to 9.19 to the dollar, a record low, before rallying to 9.13 in the afternoon.
Emerging market currencies are weakening across the world on expectations that the US Federal Reserve and European Central Bank will soon start raising interest rates, making their assets more attractive. But Turkey’s currency is falling faster than most others because of political concerns about Erdogan. The lira moved past the nine to the dollar mark for the first time on Monday, when Erdogan suggested that Turkey might conduct a new military operation in Syria.
A dollar was worth 3.75 lira at the start of 2018. Erdogan has fired three central bank governors since 2019, undermining investor confidence and leading to losses in the value of the lira that make life more difficult for ordinary Turks. The powerful Turkish leader has called high interest rates “the mother and father of all evil”, demanding cheap money policies that stimulate lending, investment and economic growth.
But this push for economic expansion at all costs has seen the annual inflation rate soar to nearly 20 percent-four times higher than the government’s official target. Current central bank governor Sahap Kavcioglu had resisted lowering interest rates during his first five months in the job, leading to speculation that he was about to be dismissed. But the bank lowered the one-week repo rate to 18 percent from 19 percent on September 23. – AFP