As Erdogan sacks central bankers, the Turkish Lira plummets to new lows.
President Recep Tayyip Erdogan fired three central bank members in an overnight decree, sending the Turkish lira to a new low versus the dollar.
The beleaguered Turkish lira has lost over a fifth of its value this year as market concerns about the policy-making bank’s independence have reached a fever pitch.
In an order issued in the official gazette, Erdogan replaced two deputy governors and a member of the monetary policy committee.
One of the fired bankers is said to have been the only one to vote against a surprise interest rate drop last month, which pushed the lira into a new downward spiral.
“The current trend is concerning, and there can’t be many (if any) investors left who believe Turkey’s central bank is still committed to fighting inflation,” Capital Economics analyst Jason Tuvey told AFP.
The Turkish lira experienced a tumultuous trading day, losing approximately 1% of its value and hitting a new historic low of 9.198 against the dollar.
Emerging market currencies are weakening around the world as investors expect the US Federal Reserve and the European Central Bank to raise interest rates shortly, making their assets more appealing.
However, due of political concerns about Erdogan, Turkey’s currency is plummeting quicker than most countries.
On Monday, the lira broke through the nine-to-dollar barrier for the first time, as Erdogan warned that Turkey would launch a fresh military action in Syria.
At the start of 2018, a dollar was worth 3.75 lira.
Since 2019, Erdogan has sacked three central bank governors, eroding investor confidence and causing currency depreciation, making life more difficult for regular Turks.
High interest rates have been dubbed “the mother and father of all evil” by Turkey’s powerful leader, who has demanded cheap money policies to boost lending, investment, and economic growth.
However, as a result of this all-out effort to expand the economy, the yearly inflation rate has risen to about 20%, four times greater than the government’s official aim.
During his first five months on the job, current central bank governor Sahap Kavcioglu resisted cutting interest rates, leading to speculation that he was likely to be fired.
Most Turkish economists were shocked when the ECB cut the one-week repo rate to 18 percent from 19 percent on September 23.
“Even as lira weakness intensifies, the likelihood of another rate decrease at the next meeting on October 21 have now increased,” currency. The Washington Newsday Brief News is a daily newspaper published in Washington, D.C.