The Turkish Lira has been sliding down this week and on Thursday morning it hit a new all-time low. USD/TRY was trading at 10.533 at the time of writing. The Central Bank will hold a meeting and they are expected to cut rates to 15%.
Turkish President Recep Tayyip Erdogan made remarks on Wednesday in which he stated his intention to bring interest rates down. He has repeatedly spoken about lowering interest rates and at one point even referred to them as ‘the devil’. The President believes lowering them will reduce inflation in the country, contrary to common economic thought.
His remarks have led to the Lira spiralling down throughout this year, as inflation continues to rise in the country. The currency is already down around 30% this year, but it could fall even further. The price of food and goods has soared and many people are experiencing hardship as a result. Officially, inflation was up 20% in October compared to the same time last year, but an independent inflation research group in the country believes that the true figure may be closer to 50%.
Economies around the world have been grappling with post-pandemic inflationary pressures, but in Turkey, the President’s push to cut interest rates alongside economic mismanagement has exacerbated the situation. His decisions have contributed to the Lira becoming the worst performing emerging currency of the year. Big businesses within the country are beginning to fear a currency crisis that could put pressure on banks because they have billions of dollar-denominated debt.
Here’s how major currency pairs were trading against the Turkish Lira at the time of writing.
USD/TRY was trading around 10.533
EUR/TRY was trading around 12.14
AUD/TRY was trading around 7.80