Turkish lira sees record low against US dollar

Turkey’s lira plummeted to 17,80 against the US dollar on Monday morning after the Central Bank held firm last week on its benchmark rate whereas central banks across the world increased the interest rates aiming to fight global inflation. 

The US Federal Reserve increased its interest rate by the largest amount in June and is expected to increase another 75 points in its meeting on Wednesday. 

Turkish lira tumbled 25 percent since the beginning of this year, adding to 44 percent loss from 2021 and became the worst performer amongst the emerging markets, mostly because of Turkish President Tayyip Erdogan’s unorthodox low interest policy.

“Interest rate is the reason, inflation is the consequence,” Erdogan says repeatedly, as he has fired two finance ministers and three central bank governors since mid-2019 who failed to follow his instructions.

"With the current policy, we see that the TL depreciates every day. The markets are anxiously waiting to see if there will be new foreign currency sources. The need for fresh funds for the economy is higher than ever before,” an anonymous banker told Cumhuriyet newspaper.

Turkey’s inflation hit an annual 78,6 percent last month as the country goes through one of the worst cost of living crises in recent history, jeopardizing an election loss for the ruling AKP (Justice and Development Party) who succeeded to cling to power since 2004.