Turkish President Recep Tayyip Erdogan insists on the need to cut interest rates in order to boost economic growth and create jobs, despite the decline of the Turkish lira to its lowest level against the dollar.
“Turkey has left old policies based on high borrowing rates and a strong currency in the name of declining inflation, and has instead shifted to a new system that prioritizes increasing investments and exports and creating strong job opportunities,” Erdogan was quoted as saying by Bloomberg News Agency on Monday.However, according to experts, Erdogan’s fiscal policy is not feasible to revive the deteriorating lira, and the German “Commerz” bank confirms that the interest rate policy pursued by the Turkish President, in addition to the dismissal of central bank chiefs, are the two most prominent reasons for the suffocating lira crisis.
“We either had to give up investments, manufacturing, growth and jobs, or face a historic challenge to achieve our priorities,” Erdogan said after a ministerial meeting in the capital, Ankara. While most central banks focus on tightening policy because the global recovery is driving up prices, Turkey’s decision to cut 4 percentage points of lending rates since September has rattled markets and frustrated investors who complain that its monetary policy is becoming increasingly volatile and unpredictable. .
Erdogan’s pledge to double down on his recent pressure to get cheaper financing from Turkey’s central bank caused the lira to plummet after Turkish markets closed. The currency fell by 2.1% to 11.4767 against the dollar and was trading at a decrease of 0.9% at 11.3804 lira against the dollar at 07:56 pm in Istanbul.
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