The Turkish lira is falling to a new record high and...

The Turkish lira collapsed, at the end of Friday’s trading, to a historical number against the US dollar, as it fell to 7.96 pounds against the US dollar, after it fell by more than 2% immediately after the Turkish central decision to keep the interest rate on the repurchase for a week without change, To bring it close to a new record high, which is 8 pounds per dollar.

The political turmoil negatively affected the domestic economy of Turkey, and caused the sharp collapse of the Turkish currency during the year 2020, between the spread of the coronavirus “Covid 19” and the deterioration of political relations between Washington and Ankara, due to differences over Syria and Turkey’s purchase of the Russian S-400 missile defense system, in addition to To the disagreements over Ankara’s interventions in the region, especially Syria.

The increasing expectations of analysts that the CBE could raise the interest rate before the meeting had contributed to the recovery of the lira, and its rise against the dollar to 7.78, but the CBE ignored the expectations of analysts that caused the currency another loss, adding to the series of losses it incurred since the beginning of this year.

During the month of July of last year, Turkish President Recep Tayyip Erdogan dismissed the governor of the Central Bank, Murat Cetinakia, due to the escalation of differences between him and the bank governor, due to his constant refusal to comply with Erdogan’s requests to reduce the interest rate, and appointed his deputy Murat Uysal as his successor.

At the time, Erdogan believed that reducing the interest rate would push the wheel of economic growth in the face of the crisis facing the country, in light of the fluctuation of the exchange rate of the lira, as well as the high rates of inflation, but recent economic data in 2020 revealed that the Turkish currency lost a quarter of its value against the US dollar. So far this year.

Phoenix Kalin, an emerging market analyst at Societe Generale, said that the rate hike would have sent a “signal of confidence” to investors that the central bank would address worsening inflation expectations and continue to gradually shift to a more traditional monetary policy. That clearly did not happen, as the bank instead reverted to a stealthy austerity policy.

Jason Tuvey, chief emerging market economist at Capital Economics for Consulting, added that it is clear that political pressure is making the Turkish bank reluctant to implement traditional measures to raise interest rates, warning that this would inflict new damage on its credibility, and increase the risk of More sudden fall of the lira.