Turkish lira drops further after inflation reaches highest point since 1998

Turkish lira continued its sliding trend on Wednesday, amid investor concerns over the country’s soaring inflation and the US currency’s worldwide strengthening.

Weakening against the foreign currencies, the lira was trading at 17.22 per dollar by 16:30 p.m. local time in Istanbul. Last week it had gained value, at 16.03 per dollar.

The currency has slumped to record lows against the dollar in 2021 and lost 44 percent of its value, after central bank cut interest rates from 19 percent to 14 percent at the last quarter of the year, despite rising inflation. This year, losses totaled around 22 percent.

Inflation in the country rose to 78.6 percent in June, according to the official data published by the Turkish Statistical Institute (TUIK) on Monday. 

TUIK stated that the main sectors where high annual increases took place were transportation with 123.37 percent, food and non-alcoholic beverages with 93.93 percent and furnishings and household equipment with 81.14 percent.

Economists and figures from the world of business urged the Central Bank to increase interest rates in line with traditional economics theory, in order to put the economy on a sustainable track.

However, Turkish President Recep Tayyip Erdogan last month said Turkey will not hike interest rates.

“Quite the opposite, we will continue cutting interest rates,” he said.