The Turkish lira faces further decline after the decision not to change …


Turkey’s Monetary Policy Committee chose, on Thursday, not to make any change in interest rates, in a decision in line with President Recep Tayyip Erdogan’s vision, despite experts’ warnings of the possible consequences of this decision.

According to the American “Bloomberg” network, this decision exposes the Turkish lira to further decline, while the Turkish Central Bank is striving to find a solution to the currency crisis, which has witnessed an unprecedented decline since 2018.

Economists say it is indisputable to raise interest rates in order to stem the currency drain, while Erdogan says he is advocating lower rates to reduce borrowing costs and ensure economic growth.

For the third month, the Monetary Policy Committee maintained the interest rate at 8.25 percent, but the Turkish authorities may have to raise the rate in light of high inflation and a weakening lira.

The Turkish financial officials confirmed that they will continue with the liquidity measures, and have also determined the value of cash that commercial lending institutions must leave aside as a reserve.

After the announcement of keeping interest rates unchanged, the lira retreated and lost the slight gains it had achieved against the dollar.

Erdogan’s vision was adopted again this month, as the lira became the third-worst performer in emerging markets, after losing 19 percent of its value against the dollar.

Meanwhile, the level of inflation exceeded 10 percent for nine months, and last July, it was 3 percent higher compared to the expectations of the Turkish central bank, which was betting at 8.9 percent at the end of 2020.

Hakan Kara, a former economist at the Turkish central bank, said in a press statement that inflation will continue its high trend, which means the urgent need for high interest rates in order to support the lira.

The financial analyst stressed the need for the Turkish central bank to set real interest rates so that he can convince domestic and foreign investors that he is serious in addressing the inflation crisis, and this requires raising the interest rate to 11 and 12 percent.

Source: Anatolia


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